Waiver of Premium Rider

Written by Jeff Root

The Waiver of Premium Rider is a benefit which pays for all of your life insurance premiums if you become disabled. This is one of the most popular benefits for life insurance policies.

It will only take place if the policyholder becomes permanently disabled. Once that takes place the remaining premium charges are no longer paid by the policyholder but the policy remains in full effect for the length of the term.

What Is A Waiver Of Premium Rider? 

Usually, with a Disability Income Rider, you might also have what is called a Waiver of Premium Rider.

This is part of the disability benefit and might be a separate benefit that you have to add to your policy but in most cases, it falls under the disability income benefit.

With this rider, your premiums do not have to be paid while if you become disabled and cannot physically go back to work.

Typically, with the waiver of premium rider, you will not have to pay your life insurance premiums for as long as your disabled.

Depending on the life insurance policy and company, the terms of the rider might stipulate that you can waive your premiums until a certain age or for the rest of your life.

What Life Insurance Policies Offer A Waiver Of Premium Rider?

This particular benefit is typically attached to term policies for a fee.  It can also be added to whole life insurance policy such as universal or variable universal policies at an additional cost.

Different companies treat the Waiver of Premium Rider differently in terms of who and what policies are eligible for it. Some will include it with term policies as a feature at no additional cost to policyholders but for whole life insurance policies, given the length of the policy, it is typically going to cost more money out of pocket.

Others will do the opposite: add it to permanent policies as an attractive feature but have it available for term policies at an additional cost to the policyholder.

Who Is Not Eligible?

People Who Are Already Disabled

You cannot take out this benefit if you are already disabled.

Your disability has to take place after your life insurance policy has been issued. There are also restrictions from some companies regarding how long your policy has to be enforced before you can make a claim for the Waiver of Premium Rider.

Most of the time your policy has to be in force for at least one year before you can submit a claim.

People 65+ (With Most Companies)

Many companies have a requirement that you have to be under the age of 65 when your disability takes place in order to qualify for this benefit.

The reason for this is that many people retire around the age of 65 and if they are disabled after that age they probably would not have earned additional income anyway so the disability is not going to be the primary reason they are unable to pay for their bills at this juncture.

People are also much more likely to become disabled once they reach this so the age limit is intended to protect life insurance companies.

How Long Does Waiver Of Premium Rider Last? 

On the note of age restrictions, most companies put an age limit on how long the premiums will be waived. If the disability occurs before the age of 60 the company might pay all premiums until the policyholder turns 65  at which point they are now responsible for the premiums. Again, this varies from one company to the next, so be sure to read the fine print.

Who Is It Best For?

The Waiver of Premium Rider is best for individuals who might not have any type of disability coverage and in the event that they become permanently disabled would be unable to pay the remaining premiums because of the lack of income or additional savings but would still want to maintain the life insurance coverage.

Pros & Cons

Pros

1. It Provides Income Replacement if Disabled

The reason the Waiver of Premium Rider is so popular and valuable is that a total disability decreases income which makes it significantly harder to pay bills and to save money.

This can impact retirement plans. More often than not disabilities mean higher medical bills and families typically have to use their savings account to cover these. Overall a disability can have a severely negative impact on net worth, the ability to save for retirement, and the ability to pass anything on to beneficiaries.

This rider eases that burden and prevents the life insurance policy from lapsing.

2. You Can Afford to Keep Your Life Insurance in Place if Disabled

The Waiver of Premium Rider would be much more beneficial to those clients who are not necessarily financially well-off and would not be able to cope with paying life insurance premiums. Those are the families who would likely need the death benefit the most,  so they would need to remain current with the premiums and this might be the only way to do that.

When people have a hard time paying their bills they typically terminate a life insurance policy to save money but if you become disabled and you decide to terminate your life insurance that can severely impact your family later especially when all of the savings and retirement money has been used to replace lost income and now there’s nothing left for final expenses.

3. Peace of Mind

There is a certain amount of peace of mind that comes with the knowledge that if you were to be disabled at work, or elsewhere that you are able to still afford life insurance coverage to protect your family.

4. Can Be Offered at No Cost (Depending on the Policy)

Again, some policies may offer the Waiver of Premium Rider completely free as a benefit. This all depends on the life insurance company offering the policy and the terms of the policy itself. Usually, term policies offer it as an additional fee, while some permanent life insurance policies offer it as a bonus to your coverage.

Most traditional life insurance policies offered today regardless of company offer this policy rider.

Cons 

1. Do Not Mistake Waiver of Premium as Disability Insurance

It doesn’t happen often, but every once in a while, people who become disabled with life insurance policies that offer the waiver of premium rider think it offers them supplemental income in the event that they are disabled.

While some policies offer a significant portion of the death benefit each month and pay for policy premiums, this premium is not meant to provide disability insurance with income replacement. Often times life insurance companies offer this form of insurance entirely separately of their life traditional insurance products.

How Much Does the Waiver of Premium Rider Cost?

The cost is going to vary from one company to another and it will also vary based on your age at the time the policy is issued.

It could be assessed as a one-time charge when your policy is issued or as an additional fee added to your monthly or annual premiums depending on the life insurance product type you have and the company through which it is issued.

Most of the time it does not cost more than a few dollars per $100,000 worth of coverage.

Best Life Insurance Companies for the Waiver of Premium Rider

Company A.M. Best Rating
Protective A+
Banner A+
AIG A
Prudential A+
Lincoln Financial A+
North American A+
Phoenix Life B
Principal A+
American National A
Ameritas (FLX Living Benefits Products) A+
Sagicor A-
SBLI A+
Assurity A-
Americo A
John Hancock A+
About Best Life Insurance Companies
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