Waiver of Premium Rider
A waiver of premium rider is an optional life or disability insurance provision that waives premium payments if the insured becomes totally disabled for a specified period, keeping the policy in force.
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Exam Tip
Waiver of premium = premiums waived if disabled. 6-month waiting period typical. Must be disabled before age 60-65. Very cost-effective rider.
What is Waiver of Premium Rider?
The waiver of premium rider is one of the most valuable insurance add-ons. If you become totally disabled and can't work, this rider keeps your life insurance policy active by waiving your premium payments.
Key Features
| Feature | Typical Terms |
|---|---|
| Waiting Period | 6 months (premiums refunded after) |
| Age Limit | Usually must become disabled before age 60-65 |
| Definition | Total disability = cannot perform own occupation (varies) |
| Duration | Continues while disabled, often until age 65 |
How It Works
- Policyholder becomes totally disabled
- Waiting period begins (usually 6 months)
- Submit proof of disability to insurer
- Premiums paid during waiting period are refunded
- Premiums waived while disability continues
- Policy stays in force with all benefits
Waiver of Premium Conditions
| Condition | Description |
|---|---|
| Total Disability | Cannot perform duties of own occupation |
| Continuous | Must be continuously disabled during waiting period |
| Medical Proof | Must provide ongoing evidence of disability |
| Age Requirement | Disability must occur before specified age |
Types of Disability Definitions
| Definition | When Benefits Paid |
|---|---|
| Own Occupation | Can't perform YOUR job (most favorable) |
| Any Occupation | Can't perform ANY job for which suited |
| Split Definition | Own occupation for 2 years, then any occupation |
Cost of Rider
- Typically adds 5-15% to base premium
- Cost depends on age, occupation, and policy type
- Generally more expensive for riskier occupations
- One of the most cost-effective riders available
Comparison: Waiver vs. Disability Insurance
| Feature | Waiver of Premium | Disability Insurance |
|---|---|---|
| What It Does | Pays your premiums | Replaces your income |
| Cost | Low (part of life policy) | Higher (standalone) |
| Benefit | Keeps policy active | Cash for living expenses |
| Duration | While disabled | Usually to age 65 |
Why It's Important
Without this rider, if you become disabled:
- You might not afford premiums
- Policy could lapse
- You'd lose coverage when most needed
- Death benefit would be lost
Exam Alert
Waiver of premium rider = insurer pays premiums if you become disabled. Typically 6-month waiting period (retroactive refund). Usually must become disabled before age 60-65. Very cost-effective protection - one of the most recommended riders.
Study This Term In
Related Terms
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.
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.