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

Updated: November 20, 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.

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Key Takeaways

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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.

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

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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

With the waiver of premium provision, you won't be required to pay premiums 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.

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    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. Understanding this waiver of premium waiting period is essential as it dictates the timing of financial relief.

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    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, the policy will continue to accumulate cash value and dividends, if applicable. This functionality is vital for preserving the policy's intended financial security for beneficiaries, illustrating the comprehensive nature of waiver of premium in life insurance.

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    Specifics of Total Disability

    The definition of total disability that triggers the waiver of premium provision 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. This ensures you can effectively utilize the waiver of premium for disability under their policy terms.

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 RIDER IN LIFE INSURANCE EXAMPLE

Consider a scenario where a policyholder becomes severely ill and cannot continue working. In this case, a waiver of premium rider allows the insured to suspend premium payments while maintaining essential life insurance coverage.

After the waiver of premium rider's waiting period, which typically lasts six months, the policyholder's premium payments would be waived, ensuring their policy benefits continue seamlessly. This mechanism is a key aspect of the waiver of premium benefit, designed to provide continued protection under the challenging circumstance of long-term illness or disability.

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.

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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.

A waiver of premium rider allows an insured to cease premium payments under specific circumstances typically tied to disability, but this benefit will not activate without meeting the strict criteria outlined in the policy. Always verify whether a life insurance policy that ensures the premium will be paid if the insured becomes disabled applies to your situation. Consider the waiting period on a waiver of premium rider, which can affect when the benefit takes effect.

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.

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    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.

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    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 your future payments until you recover.

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    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.

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    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.

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    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.

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    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.

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    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.

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    There may be duration limits

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

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    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.

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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 and not 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. It 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. It is typically up to 25% of your policy’s cost.

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INTERPRETATIONS OF QUALIFYING DISABILITIES

A waiver of premium rider takes effect when the policyholder has 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 under a life insurance waiver of premium rider:

  • 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.

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    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.

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    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

    A life insurance policy's waiver of premium rider has the ability to ensure that if you are disabled on the job, your coverage remains in force without the burden of premium payments during your recovery period.

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    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.

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    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.

These scenarios underscore the practicality of adding a waiver of premium rider, particularly if you find yourself in any of these situations. It’s vital to confirm with your insurer whether a waiver of premium provision may be included in your policy and understand the specific terms.

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MONEYGEEK EXPERT TIP

The Centers for Disease Control and Prevention (CDC) reported that around 28.7% 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.

  1. 1
    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.

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    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.

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    Contact your insurer and file your claim

    Let your insurance provider know about your plan to file a claim. Ask if there are any additional requirements. You may need 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?

What is a waiver of premium rider in life insurance?

What is a disability waiver?

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

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

How do you file a waiver of premium claim?

Which type of life insurance rider will waive the premium?

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

What is a payor benefit rider?

Which provision does the waiver of premium not include?

About Mark Fitzpatrick

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Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He 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.

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