What is a Disability Waiver of Premium?
A disability waiver of premium is a rider added to a life insurance policy that gets activated in the event of a qualifying disability impacting the policy owner. In that case, as long as the disability persists, the policy owner no longer needs to pay their premiums in order to keep the coverage in force.
Waiver of premium riders
Some life insurance companies offer policy riders (basically, add-ons) that expand the policy’s benefits. A waiver of premium may be one of those rider options, and that waiver may be activated by specific instances, like critical illness or a disability.
A rider that waives premiums in the event of a disability means that once the life insurance company determines that the policy owner has a qualifying disability, that individual no longer needs to pay their predetermined premiums in order to keep the life insurance policy.
Adding a waiver of premium rider increases the cost of the life insurance policy.
Qualifying disabilities
Even if they choose to add a disability waiver of premium rider to their life insurance coverage, the policy owner doesn’t get to decide whether or not they deem a disability sufficient to activate the rider. Instead, the life insurance company usually has to determine that the individual is “totally disabled.”
Qualifying disabilities generally need to seriously affect the policy owner’s mobility or physical functionality. Paralysis or blindness could count as qualifying disabilities, for example. In most cases, a disability will activate the rider if the individual is unable to work or go about their pre-disability daily activities.
There is also an elimination period, usually six months, that the insured needs to wait. It starts when the disability occurs and premiums won’t be waived until the period ends. This eliminates claims for short-term disabilities.
A note from your doctor or documentation from the Social Security Administration (SSA) can usually prove a qualifying disability to the life insurance company.
How a disability waiver of premium rider works
These riders cover all premiums paid while the policy owner lives with their disability. If they paid premiums after the disability (e.g., while the insurance company was investigating it to determine if it qualified to activate the rider), the insurer generally returns those premiums to the policy owner.
While activated, this rider maintains the policy normally — including the cash value component, if the policy includes it. However, various policy types like universal and whole life disability waiver of premium riders may perform differently. There may also be multiple riders to choose from on an individual policy that will provide varying levels of coverage.
The waiver of premium rider stays in effect as long as the policy owner has the disability or until specified ages (e.g., 65), depending on the contract. If they’re able to resume normal activity, the waiver ends and they become responsible for paying premiums in order to keep the policy active.