Waiver of Premium Rider
A waiver of premium rider is a life insurance provision that waives all premium payments if the policyholder becomes totally disabled, keeping the policy in force without any out-of-pocket cost during the disability.
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Exam Tip
Waiver of Premium = if disabled, premiums waived but policy stays in force. Usually 6-month waiting period and age 60-65 cutoff.
What is a Waiver of Premium Rider?
A waiver of premium rider is one of the most valuable and commonly purchased life insurance riders. If the policyholder becomes totally disabled and unable to work, the insurance company waives all premium payments while keeping the full policy benefits in force.
How Waiver of Premium Works
- Disability Occurs - Policyholder becomes totally disabled
- Waiting Period - Typically 6 months (some shorter)
- Proof Required - Medical evidence of total disability
- Premiums Waived - No premium payments required
- Policy Continues - Full death benefit maintained
- Cash Value Grows - Policy continues building value
Key Definitions
| Term | Definition |
|---|---|
| Total Disability | Unable to perform duties of own occupation |
| Elimination Period | Waiting period before benefits begin |
| Retroactive Premium | Some policies refund premiums paid during waiting period |
Waiver of Premium Requirements
| Requirement | Typical Standard |
|---|---|
| Age Limit | Usually under 60-65 at disability onset |
| Waiting Period | 6 months (90 days for some policies) |
| Definition of Disability | Own occupation or any occupation |
| Proof of Disability | Annual medical certification |
Types of Waiver
| Type | When Premium Waiver Ends |
|---|---|
| Standard | At age 65 or recovery |
| Extended | Continues for life if disabled |
| Payor Waiver | On juvenile policies if payor disabled |
Comparison with Disability Insurance
| Feature | Waiver of Premium | Disability Insurance |
|---|---|---|
| Purpose | Keeps life insurance in force | Replaces income |
| Benefit | Pays premiums | Pays cash benefit |
| Cost | Minimal | Significant |
| Coverage | Life insurance only | General living expenses |
Cost of Waiver of Premium
- Typically adds 1-5% to base premium
- Cost varies by:
- Age at policy issue
- Occupation risk class
- Definition of disability
- Elimination period
Important Considerations
| Consideration | Explanation |
|---|---|
| When to Add | Most valuable when young and healthy |
| Occupation Matters | Higher risk jobs = higher cost |
| Read Definition | "Own occupation" better than "any occupation" |
| Age Limits | Benefit typically ends at 65 |
Study This Term In
Related Terms
Rider (Insurance)
A rider is an optional add-on to an insurance policy that provides additional benefits or modifies coverage for an extra premium, allowing policyholders to customize their protection beyond the base policy.
Disability Insurance
Disability insurance provides income replacement when a policyholder cannot work due to illness or injury, typically paying 60-70% of pre-disability income after an elimination period.
Premium (Insurance)
An insurance premium is the amount paid by the policyholder to the insurance company for coverage, typically paid monthly, quarterly, or annually.
Whole Life Insurance
Whole life insurance is a permanent life insurance policy that provides lifetime coverage with fixed premiums, a guaranteed death benefit, and cash value that grows at a guaranteed rate.
Term Life Insurance
Term life insurance provides death benefit protection for a specific period (term), with no cash value accumulation, offering the lowest premium for the highest coverage.
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