Waiver of Premium in Life Insurance: Everything You Need to Know

Name: Waiver of Premium in Life Insurance: Everything You Need to Know
Item: Waiver of Premium in Life Insurance: Everything You Need to Know
Author: Mark Fitzpatrick

A waiver of premium rider is a life insurance policy provision that eliminates the necessity for premium payments if the policyholder becomes critically ill or disabled. Your health and age may impact your eligibility.

Updated: June 26, 2024

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Adding a waiver of premium rider to your life insurance policy protects you against a lapse in coverage if you can’t pay your premiums because of a disability. The definition of disability triggering the waiver of premium benefit varies per insurer, so it’s important to check the fine print.

Depending on the insurance provider, this rider may be included for free as a clause in your policy. However, in most cases, the policyholder will have to add a waiver of premium benefit as a rider at an additional cost.

When adding this provision, note that the waiting period on a waiver of premium rider can also differ among insurers, affecting when the benefit takes effect.

TABLE OF CONTENTS

Waiver of Premium Benefit in Life Insurance, Defined
Advantages of a Waiver of Premium Rider
Drawbacks of a Waiver of Premium Rider
Considerations When Adding a Waiver of Premium Provision
Reasons to Add a Waiver of Premium Rider to Your Life Insurance
Process of Filing a Waiver of Premium Claim
FAQ About Waiver of Premium Benefit in Life Insurance

Key Takeaways

A waiver of premium is a type of life insurance policy rider that allows you to waive premium payments should you develop a qualifying disability.

While some companies offer a waiver of premium provision for free as a clause in a life insurance policy, others consider it an add-on that may increase your premiums.

Insurance providers have different qualification requirements, conditions and definitions of disability. Individuals with pre-existing conditions are usually not eligible for a waiver of premium benefit.

Waiver of Premium Benefit in Life Insurance Overview

The waiver of premium provision gets you off the hook for premium payments if you meet certain conditions. For instance, if you become disabled or ill, the insurance company may allow you to stop making premium payments and keep your coverage.

Each company has its own rules for signing up for a waiver of premium rider in life insurance. Generally, the waiver of premium provision is either included in the base policy or must be purchased as a rider.

Getting a waiver of premium as an add-on may make your rates more expensive.

Waiver of Premium in Life Insurance: Mechanisms

The waiver of premium rider can be a vital feature in life insurance policies, providing financial relief during times of disability or severe illness. It allows policyholders to maintain their coverage without financial strain while they are unable to work. Understanding the mechanics of this rider is essential for anyone considering its benefits as part of their life insurance plan.

Activation and Waiting Period

A waiver of premium rider allows an insured to waive premium payments if the insured is fully disabled, as determined by the insurer. However, this rider doesn't activate immediately after a disability or illness is reported. Even after the insurance provider deems you fully disabled, there's typically a waiting period on a waiver of premium rider. During this time, you must continue to pay premiums. If your claim is approved, many insurers will reimburse the premiums paid during this period.

Continuation of Policy Benefits

A life insurance policy waiver of premium rider has the ability to ensure that your policy's benefits continue as if you never missed a payment. If you have whole life or variable life insurance, it will continue to accumulate cash value and dividends, if applicable.

Specifics of Total Disability

The definition of total disability can vary among insurers. Some may define it as the inability to perform your regular job, while others may require that you be unable to perform any job. Understanding this definition is vital when considering the waiver of premium rider.

Choosing a life insurance policy with a waiver of premium rider can significantly impact your financial security during unexpected life events. It's advisable to carefully review the terms associated with this rider and discuss them with your insurance advisor to ensure you fully understand and can take advantage of its provisions.

Waiver of Premium in Life Insurance: Cost

The cost of adding a waiver of premium rider to your life insurance policy can vary widely based on factors like age, occupation, health and the type of policy. For instance, a young, healthy individual working in a low-risk occupation may find the cost of this rider to be relatively minimal. Conversely, someone in a high-risk job or with pre-existing health conditions might face a higher expense.

Although a waiver of premium benefit may seem like an additional expense at the outset, the protection it offers can be invaluable for certain policyholders. For example, a sole breadwinner with a family relying on their income may find this a good addition to their coverage. If an unexpected illness or accident leaves them unable to work, paying life insurance premiums may become a monetary strain. Having a disability waiver of premium rider could be a financial lifeline, ensuring that the life insurance policy continues without the need for premium payments during the period of disability.

MONEYGEEK EXPERT TIP

When purchasing a life insurance policy, make sure you check the fine print. Not all policies have a waiver of premium clause. Most insurance providers also don’t offer this benefit to anyone over 65. If you’re a senior, you're likely ineligible.

Benefits of a Waiver of Premium Provision

A waiver of premium rider in life insurance can serve as a financial safety net to help you in a time of need. But it may not be a suitable option for everyone. Understanding this provision's unique benefits can help determine if it's right for you.

It offers financial protection

Getting seriously ill or injured can leave you unable to work. A waiver of premium rider will allow you to stop making payments for your life insurance policy. Instead, this rider will cover the premiums.

It prevents a lapse in coverage

An inability to make premium payments can cause your life insurance coverage to lapse. A waiver of premium clause can prevent that from happening as it waives off your future payments until you recover.

It isn't limited to one use

Using a waiver of premium in life insurance isn’t limited to one incident. You may use it several times as long as you meet the qualifications. That’s especially helpful should your disability or illness recur.

It helps reduce stress

An illness or disability doesn’t only affect you physically but also mentally. Worrying about your finances and premium payments can add to your stress. With a waiver of premium benefit, you don’t have to figure out how to pay for your policy while recovering.

Potential Drawbacks of a Waiver of Premium Rider

While the waiver of premium rider provides valuable financial protection, it also comes with potential drawbacks. Understanding these can help you make an informed decision that aligns with your unique needs and circumstances.

There's an additional cost

Adding a waiver of premium rider isn't free and can increase the overall cost of your policy. Weigh this against the benefits it offers.

There may be a waiting period

Many policies include a waiting period for a waiver of premium rider. Also referred to as an elimination period, this time depends on the insurance provider. In most cases, it's around six months. This delay can be challenging if you're unable to work during this time.

Qualifications may vary

The definitions for qualifying disabilities or illnesses can vary, and some waiver of premium riders might not cover partial disabilities, limiting the protection.

There may be duration limits

Some riders only waive premiums up to a certain age, such as 60 or 65, potentially leaving you with out-of-pocket expenses afterward.

You may need to undergo medical examinations

Insurance companies may require policyholders with a waiver of premium rider to get periodic medical examinations to continue the benefits. 

Factors to Consider When Adding a Waiver of Premium Provision to a Policy

It's wise to consider some factors before adding a waiver of premium provision to your life insurance policy. Get information from your insurance provider because conditions, rules and requirements vary per insurer. Reading the fine print can help you better understand how this benefit works.

Factor	Description
Qualifications	Eligibility requirements for a waiver of premium rider vary depending on the insurance carrier, so clarify them with the provider early on. Typically, the policyholder must be less than 60 or 65 years old. They shouldn’t have a pre-existing disability or illness. The insurer may also consider overall health, lifestyle and occupation. Some provisions may only activate if the disability keeps you from working for a minimum of six months.
Waiting period	In most cases, the waiver of premium for disability only takes effect after the waiting period passes. This can be anywhere from a few months to a year, usually six months.
Duration	The waiver of premium provision takes effect after the waiting period and lasts until the policyholder recovers from the disability. In some cases, the duration may be up to a specific age. The policy contract will have the details. After the duration of the waiver, the policyholder will have to pay premiums again.
Expiration date	The waiver of premium in life insurance may expire depending on the terms and conditions stated in the policy contract. Usually, the age limit is 60 or 65. After this age, the policyholder will likely no longer qualify for the premium waiver.
Cost	Adding riders, such as a waiver of premium, may add additional cost to your life insurance rate. The amount depends on the insurer and individualized factors like your age and health. This is typically up to 25% of your policy’s cost.

INTERPRETATIONS OF QUALIFYING DISABILITIES

A waiver of premium rider takes effect when the policyholder suffers from a disability. However, not all types of disabilities may qualify, and insurance companies interpret disability in various ways.

Here are some common interpretations of what can be considered a qualifying disability:

An injury or sickness caused the disability.
The disability causes loss of mobility, such as losing a limb.
The disability causes sensory loss, such as hearing impairment or blindness.
An injury or illness prevents the policyholder from performing the occupation they qualified for through education, experience or training.

Reasons to Add a Waiver of Premium Rider to a Life Insurance Policy

Although a waiver of premium rider offers multiple benefits, it’s not always the best option. It can be suitable for people with only one source of income, who have high-risk professions or hobbies or who have a family history of serious illness.

You only have one source of income

A disability can prevent you from going to work, which means you may suffer from a temporary loss of income. If you only have one source of income, getting a waiver of premium rider may be wise since it lessens the possible financial burdens you may have to face if you become disabled.

You have a high-risk profession

Some jobs come with inherent risks. If there’s a high chance of you getting injured on the job, consider looking for a policy with a waiver of premium provision.

Examples of high-risk professions include the following:

Firefighters
Police officers
Pilots
Construction workers
Moving company employees
Bus and truck drivers
EMTs
Nurses

You have risky hobbies

Certain hobbies and activities may increase the risk of serious injuries leading to disability. A waiver of premium benefit provides a financial safety net should unexpected incidents happen.

You’re at risk of getting a serious illness based on your family history

If you think you’re at risk of getting a disease based on your family health history, getting a waiver of premium benefit may be a smart move. It can be a form of preparation for unfortunate circumstances should you also suffer from a similar condition and end up with a disability.

MONEYGEEK EXPERT TIP

The Centers for Disease Control and Prevention (CDC) reported that around 27% of Americans have some type of disability. While life can be unpredictable, and there’s no sure way of knowing whether a person will eventually have a disability, certain lifestyles may increase the risk. If you know you have specific risk factors, it might be worth getting a waiver of premium.

How to File a Waiver of Premium Claim

If you're interested in getting a waiver of premium clause, you should add it to your policy when you buy your life insurance. The following steps will walk you through the process of filing a waiver of premium claim if you have a covered disability.

Get a medical statement from your doctor

Requirements for filing a waiver of premium claim depend on the insurance provider. Typically, it includes submitting a medical statement from a doctor — you can’t say that you have a disability without proof.

Your insurance provider will then determine if you’re qualified for a claim. Make sure the certificate provides details on your condition and that it prevents you from working.

Obtain a notice from the Social Security Administration (SSA)

In some instances, the insurance provider may require additional evidence by requesting a copy of a notice from the SSA. This document can confirm a disability or physical impairment. It will also verify your inability to work due to your disability.

You can find the nearest SSA office using the agency’s field office locator.

Contact your insurer and file your claim

Let your insurance provider know about your plan to file a claim. Ask them if there are any additional requirements. They may ask you to fill out a claim form or provide additional information.

Depending on the company, you may be able to file a claim online or through mail or fax.

Navigating the process of filing a waiver of premium claim requires attention to detail and adherence to your insurer's specific procedures. By following these steps and ensuring all documentation is complete and accurate, you can facilitate the approval of your claim, allowing you to focus on your health without the financial burden of premium payments.

FAQ About Waiver of Premium in Life Insurance

MoneyGeek answered some common questions about waiver of premium clauses and riders to help you learn more about the topic.

What is an insurance waiver?

An insurance waiver is a document or provision that allows an individual to opt out of required insurance coverage or exempts them from certain conditions within an insurance policy.

What is a waiver of premium rider in life insurance?

A waiver of premium can be a clause or rider that allows the policyholder to waive their premium payments in the event of a qualifying disability or illness.

What is a disability waiver?

A disability waiver, also known as a disability waiver of premium rider, is a specific type of waiver of premium. Generally, the term "waiver of premium" broadly applies to any condition under which the insurance company allows the cessation of premium payments while the coverage continues. The "disability waiver of premium rider" specifically refers to the condition being related to the policyholder’s disability.

What is the level of disability required to activate a waiver of premium provision?

The definition of a qualifying disability differs per insurer. We recommend checking with the insurance company to find out more.

What is the waiting period for a waiver of premium rider in life insurance policies?

Typically, the waiver of premium rider waiting period spans around six months, but it can vary from a few months to a year, depending on the insurer's policy.

How do you file a waiver of premium claim?

The claims process for a waiver of premium benefit may vary per insurer. Typically, it includes submitting a medical statement from a doctor, an SSA notice and a completed claim form.

Which type of life insurance rider will waive the premium?

A waiver of premium rider or a disability waiver of premium rider is designed to waive premium payments on a life insurance policy in the event of a qualifying disability.

When does a life insurance policy waiver of premium take effect?

A waiver of premium in life insurance generally takes effect after the specified waiting period, provided the policyholder meets the criteria for a qualifying disability as defined by the insurer.

What is a payor benefit rider?

A payor benefit clause or rider, also known as a juvenile waiver rider, is an addition to a life insurance policy that waives premium payments if the policy's payor, typically a parent or guardian, passes away or becomes disabled. This ensures the policy remains active for the beneficiary.

Which provision does the waiver of premium not include?

Life insurance waiver of premium does not include coverage for short-term disabilities or illnesses that do not meet the insurer's definition of total disability, as specified in the policy's terms.

About Mark Fitzpatrick

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.

sources

Centers for Disease Control and Prevention. "Disability Impacts All of Us." Accessed June 25, 2024.
Social Security Administration. "Social Security Office Locator." Accessed June 25, 2024.