May 9, 2019 12:00 PM PT

Waiver of Premium Rider

Read more about Life Insurance

Does your family medical history, occupation, or hobby put you at risk for a disability? A waiver of premium rider may be right for you. See if it's worth the cost below.

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One in five Americans lives with a disability. If your lifestyle puts you at risk, consider adding a waiver of premium rider to your life insurance policy. It can serve as a fallback if something prevents you from being able to afford your monthly premium.

Read on to learn more.

What Is a Waiver of Premium Rider?

A waiver of premium rider—also known as a waiver of premium for disability—prevents your life insurance coverage from lapsing if you become unable to continue premium payments.

What are life insurance policy riders?
Riders are optional benefits that provide additional coverage on your policy. They allow you to "personalize" your life insurance by adding coverage for different scenarios that may apply to you.

Riders often cost extra per month, so you should only select those that make sense. Other examples include:

  • Convertibility
  • Accelerated death benefit
  • Child life insurance

This rider only goes into effect if you become too sick or injured to work. Qualifying scenarios include things like:

  • Severe injury
  • Permanent illness
  • Another event that causes you to be disabled.

The waiver of premium rider covers your policy premiums so your life insurance coverage remains active. You can then use the money you'd spend on the premium to pay for other living expenses or healthcare.

So what's the downside?

This rider adds cost to your monthly premium. The price varies depending on your health and how likely you are to use the rider while your policy is in force.

You can add waiver of premium riders for both term and whole (permanent) policies. Term is more common because of the age limit for enacting the rider (more on this below).

How Does the Waiver of Premium Disability Benefit Work?

You can add a waiver of premium rider when you purchase your policy. You will be charged for the additional coverage, resulting in a slightly higher monthly premium. (This added "fee" is what is used to pay your premiums if you no longer can.)

If you become disabled or have another qualifying circumstance, you can file a claim with the insurance company. You can do this more than once throughout your policy term. But there is a six-month waiting period before your premiums are waived.

After the waiting period and approval of your claim, the insurance company will waive the premiums for your policy and reimburse the premiums you paid during the waiting period. They will continue to pay your premiums for as long as the rider is in effect.

A waiver of premium rider is NOT a one-size-fits-all benefit. You'll need to read your policy carefully or ask your life insurance agent to explain the details.

Your premiums will be paid as long as the rider is in effect. Once you are no longer disabled, the benefits of the rider end and you will resume paying the premiums.

If the disability is long term, the premiums will only be covered until a certain age, typically around age 65-70.

Most companies also require that the insured person be under age 65 when they become disabled in order for the waiver of premium to be activated.

Specific documents you will need:

  • A signed statement from the doctor stating your disability.
  • A letter from the Social Security Administration stating you are disabled.
  • A rider claim form.
  • A letter of instruction from you (the policyholder) indicating you would like to activate the rider.

Who Qualifies for the Waiver of Premium Rider?

If you are age 18-60 and do not have pre-existing disabilities, you can usually qualify for the waiver of premium rider. People who are already disabled will not qualify.

You can only purchase this rider when you apply for your policy—it cannot be added at a later date. If you work in a high-risk profession, it may be harder to find an insurance company that offers a waiver of premium rider on your policy.

Examples of "high risk" professions include (but are not limited to):

  • Police officers
  • Firefighters
  • Pilots
  • Bus/truck drivers
  • EMTs
  • Nurses
  • Movers

Companies place restrictions on how long your policy must be in effect before you can activate the rider. Sometimes it can be at least one year after the policy has been in force. Check your policy or with your insurance company for specifics.

How Much Does the Waiver of Premium Provision Cost?

The cost of a waiver of premium rider depends on the risk assigned to you based on your age and health.

Remember, the waiver covers an unforeseen disability, not one you already have. So the insurance company has to determine the likelihood of you developing a disability.

Check with your insurance company for their claim-filing procedure, as it often varies by company.

When applying for a life insurance policy, you have two underwriting options: medically underwritten or non-medically underwritten.

  • Medically Underwritten
    Means you have to take a medical exam before you are approved for the policy. The exam lets the insurance company determine your risk, or the likelihood of you dying before your policy term is over or paid off.

    The higher your risk, the higher your monthly premium is. But the opposite is also true—the lower your risk, the lower your monthly premium is.

  • Non-Medically Underwritten
    Means you do not have to take an exam. You may have to answer health-related questions via an online application or a phone interview.

    But in some cases, you are not required to provide any medical/health information at all.

The waiver of premium rider is usually a percentage of your monthly premium.

  • Term Policy: The rider may cost between 15% and 25% of your premium.

    Example: If your policy premium is $50, you may pay an additional $7.50, for a total monthly premium of $57.50.

  • Whole Policy: You may only pay 3% to 5% of your premium.

    Example: If your premium is $50, you'd pay an additional $1.50 to $2.50 per month.

    Is the Waiver of Premium Rider Worth It?

    The answer to this question depends on your financial priorities and resources. While you can't tell the future, you probably know if your profession or hobbies put you at risk for disability. Or perhaps you have a family history of illness (like cancer) or other disabling factors.

    A disability can affect your ability to pay for your life insurance, especially if it affects your ability to work and generate an income. Disabilities may also mean additional medical bills. These may require you or your family to tap into your savings.

    A waiver of premium allows you to continue having coverage despite the added financial strain. Without that rider, you may have to terminate your policy and use the premium payments for medical or other bills.

    Ask your life insurance agent or company how much a waiver of premium rider would add to your monthly premium. If the cost is small, you may want to consider it for peace of mind.

    Bottom Line

    No one plans for a disability, but it happens to 20% of Americans. To protect yourself, you can add a waiver of premium rider to your policy for as little as 3% (whole policy) or 10% (term policy) of your monthly premium.

    Make sure you add the rider when you're first purchasing the policy because it can't be added after.

    If a disability does affect your ability to pay your life insurance premium, your policy won't lapse and you'll still have coverage. Consider your occupation, hobbies, and family history before making your decision.

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