Life insurance safeguards your family, but what safeguards your life insurance policy? If you become disabled, you may find it difficult to pay your payments and keep your coverage.
This is where the waiver of premium riders can come in handy. It keeps your coverage alive if you suffer an injury or disease that leaves you disabled and unable to pay your premiums.
Continue reading to learn more about the life insurance waiver of premium rider and how it works.
What Is a Waiver of Premium?
A waiver of premium is a sort of add-on cover, sometimes known as a ‘rider,’ that can be added to your life insurance policy.
It may pay your monthly premiums if you are unable to work due to a serious injury or illness. The waiver of premium benefit rider keeps your life insurance policy alive, giving you peace of mind during trying circumstances.
Consider a waiver of premium rider to be insurance for your insurance policy, but it will come at a cost. Including a waiver of the premium clause may increase the cost of your premium, so do the arithmetic ahead of time. It also does not cover you if you are unable to work as a result of unemployment or redundancy.
How Does a Waiver of Premium Rider Work?
If you want to activate the waiver, you must contact your insurance provider. You must meet the criteria listed in the terms and conditions of your life insurance policy.
The qualifying conditions vary amongst insurance companies, but in almost all situations, you’ll only be covered for major injury, disability, or critical illness that occurred during the term of your policy, not before you purchased it.
You must offer proof that you are unable to work. This could be: depending on your insurance provider:
- A duplicate of your medical records as well as a doctor’s report (in some cases this may be a doctor appointed by your insurance provider)
- Your insurance provider will send an assessor to your home to confirm your circumstances.
How Can You Qualify for a Waiver of Premium Rider?
It is normally difficult to qualify for a premium rider waiver. Your disability must meet the insurance company’s definition of disability, and you must be under the waiver’s maximum age limit.
Meeting the criterion of disability typically necessitates total disability. Most providers interpret this as being under the regular treatment of a licensed physician for your injury or sickness and:
- Capable of working but have lost sight in both eyes or two limbs, or
- You are unable to fulfill any of your existing job obligations (for an initial period)
- Incapable of performing the tasks of any job for which you are reasonably competent (after the early years of your disability)
- Each insurance determines how to qualify and which ailments the rider will not cover, so check with your provider for specifics.
Waiver Premium Rider Age Restrictions
Some insurers have age restrictions for individuals who can use the waiver of premium rider, but others are more lenient. Companies that have age restrictions often cap the rider at 65 years old.
Due to their age, some applicants may be ineligible to add a premium waiver rider to their policy.
How Long Does a Waiver of Premium Last?
A premium waiver is typically valid until:
- You can go back to work.
- You no longer meet the ‘disability’ requirements.
- Your life insurance policy’s term has come to an end.
- You reach retirement age, which is usually between 60 and 65.
Is a Waiver of Premium Rider Required?
Check to see whether you have other coverage if you are unable to work before purchasing a waiver of premium rider. Income protection insurance, for example, can replace a portion of your income if you become seriously ill or permanently handicapped.
Can I Add a Waiver Premium to My Existing Life Insurance Policy?
Unfortunately, no. A waiver of premium rider is only available when you purchase a life insurance policy. It is not something that can be added later.
What Do Insurance Companies Mean by “Unable to Work”?
Varied insurance companies have different definitions of ‘unable to work.’ That is why it is critical to read the terms and conditions before signing up for a premium rider waiver.
Some insurance companies will allow you to file a claim if you are unable to fulfill your regular employment duties. Others will only grant you a waiver if you are unable to work in any capacity.
In some circumstances, insurance companies will evaluate the level of tasks you are unable to perform. Walking, climbing stairs, bending, getting in and out of a car, and even writing are examples of everyday tasks.
Before signing up, carefully read the terms and conditions to ensure you understand the provider’s definitions of ‘unable to work’ and ‘disability.’
How Does Insurance Determine if You Are Physically or Mentally Unable to Work?
This is determined by the level of coverage you have, which will reflect how your policy defines incapacity to work. In most cases, the benefit will be set up on either:
- An ‘own occupation’ basis: This implies you can get the benefit even if you can’t do your regular job.
- A’suited occupation’ basis: It can only be used if you are unable to execute your own or a similar profession.
- An ‘any occupation’ basis: Your premiums will be waived only if it is determined that you are unable to perform any employment.
Some insurers may analyze your ability to work by testing your ability to execute common tasks such as walking, bending, lifting, climbing stairs, and writing.
Is Life Insurance Waiver of Premium Riders Worthwhile?
Adding a premium waiver to a life insurance policy can assist protect against the chance of your life insurance being canceled because you are unable to pay your payments due to illness.
You’ll almost likely have to pay a higher premium – own occupation cover often costs the highest because the benefit should be easier to trigger than any occupation cover, which typically costs the least.
In exchange, you’re ensuring that your life insurance doesn’t lapse, potentially at a time when, in the worst-case scenario, a catastrophic illness could increase the likelihood that you’ll need it.
It’s also worth noting that purchasing replacement life insurance on the same conditions at an older age is likely to result in higher monthly premiums. It could cost considerably more depending on the nature of the medical problem and whether or not you have to disclose it to a potential insurer.
What else should I keep an eye out for?
It’s critical to realize that each insurance company is unique. Here are some things to look for when choosing a premium waiver policy:
- Waiting period – Typically, you must have been unwell or disabled for four weeks to nine months before the waiver takes effect, so make sure you can handle your monthly life insurance payments during that time.
- Exclusion period – some insurance companies will not cover the first six months after the policy begins.
- Age restriction – Varying insurance companies set different ages for when the premium waiver will no longer be applicable, which is usually between 60 and 65.
- High-risk employment – If your job is considered unsafe or hazardous, you may be unable to obtain a waiver of premium rider.
What are the Benefits of a Waiver of Premium Rider?
One or more impairments affect one out of every five Canadians aged 15 and up. This demonstrates that disability is more common than many people believe. Purchasing supplementary coverage that provides disability protection makes sense.
Paying life insurance payments may be difficult if a person loses his or her job due to disability. However, while life insurance helps protect your family’s future, the decision to forego it is not easy.
Fortunately, if you purchase a rider waiver, you will not have to make that option. It keeps your coverage active even if you are unable to pay premiums because of a disability. Furthermore, if your policy has a savings component, it might aid in the preservation of the cash value. You will not have to utilize your cash value to pay premiums with the waiver of a premium add-on.
As useful as the rider is, it is not a substitute for disability insurance. The latter provides your monthly premium benefits, which might assist you in covering all of your expenses and bills, not simply premiums. Furthermore, qualifying for it is less difficult than qualifying for the premium rider waiver.
Furthermore, the waiver of premium rider makes more sense if you are young and healthy and wish to purchase long-term coverage. As previously stated, the cost of the add-on is determined by your health and age, among other factors. As a result, the rider will cost you less if you are younger and healthier.
How Can I Get a Life Insurance Policy with a Waiver of Premium Rider?
Riders are optional features that provide benefits in addition to those provided by the base policy. A waiver of premium rider relieves you of the burden of paying premiums in the event of disability.
If you become disabled and are unable to pay your premiums, the insurer will waive them for the duration of your disability. This rider is one of the most popular add-ons purchased by new policyholders. When you buy a policy, you can add this rider for a modest charge. In most circumstances, the rider cannot be added later. Underwriting approval is included in the rider. You will not be eligible if you have a pre-existing disability.
Waiver of Premium Rider Claim Requirements
Filing a claim requires a physician’s statement and a notice from the Social Security Administration (SSA) certifying the physical impairment or disability. After that, the applicant could submit a completed claim form. The waiver of premiums permits limited personal funds to be directed for palliative care, personal finances, and living expenditures. The most significant benefit, though, is the insurance policy’s continuous protection.
How Much Does a Premium Rider Waiver Cost?
According to Haven Life, it will cost 15% to 25% of the monthly premium for a term life insurance policy. If you’re a 35-year-old man buying a 20-year, $500,000 insurance for $21.05 per month, that’s just under $3 per month.
Should I Get a Waiver for Premium Rider?
Is it beneficial to waive the premium rider altogether? Because a career-ending disability affects one in every four people at some point, purchasing supplemental disability coverage is an essential preventative measure. However, rather than including a waiver of premium rider on their life insurance policy, the vast majority of people would be better off purchasing a standalone disability insurance policy.
What Are Some Restrictions?
It’s possible that if you want to waive premium riders, you’ll need to meet certain requirements first, such as not having any pre-existing ailments or physical impairments. You can also run across age or health-related limits. Last but not least, a rider that waives the premium could not be accessible in your state.
What Are the Claim Requirements?
Typically, in order to file a claim, a beneficiary is required to provide a statement from their attending physician as well as a letter from the Social Security Administration (SSA) certifying that they are disabled. The waiver of premiums enables the reallocation of limited personal resources toward palliative care, personal finances, and living expenditures, among other things.
Conclusion
A premium rider waiver is a significant add-on that may be purchased for a nominal charge. In the event of disability, the insurer will exempt the payment of life insurance premiums. It does not, however, give the level of protection that disability insurance does.
Waiver of Premium Rider FAQs
Is waiver of premium the same as PPI?
A premium waiver and personal protection insurance (PPI) are not the same thing. PPI is an individual contract that is frequently marketed unwittingly with a personal loan, whereas waiver of premium is an additional feature of a life insurance policy rather than a contract in and of itself.
What is the waiting period on a waiver of premium rider?
A six-month or longer waiting period
What is a waiver in insurance?
An insurance waiver is a document that provides the employee’s “statement that you have been offered a plan, but have opted to refuse” the coverage offered, as well as the reason for doing so.
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