What is a Waiver of Premium?
A waiver of premium rider is a life insurance policy add-on that eliminates the policy owner’s requirement to pay premiums while they meet certain qualifying conditions, like living with a disability or being unemployed.
What a waiver of premium rider can do
When you add a waiver of premium rider to your life insurance coverage, you add a clause to the contract with your insurer that says that in specific cases, you can maintain your coverage without paying your premiums.
Usually, these riders lay out what would qualify you for the waiver. That generally includes:
Serious illnesses
Severe injuries
Disabilities
While disability waiver of premiums are the most common type of premium-waiving riders by a long shot, certain insurers offer other waiver of premium riders. Some offer waiver of premium riders for unemployment, for example.
With any type of waiver of premium rider, a qualifying situation means you won’t need to pay premiums in order to prevent a policy lapse. Your insurer continues waiving your premiums for as long as the situation persists. But as soon as the situation ends (e.g., you heal from the injury or illness), you’re again responsible for making premium payments in order to keep your policy in force.
Life insurance providers don’t give away this benefit for free. If you decide to add a waiver of premium rider to your life insurance policy, it will cost you. It will either increase your premiums or you’ll need to pay an upfront fee for it when finalizing your insurance contract.
How these riders operate
Waiver of premium riders don’t activate right away. For starters, you’ll need to prove to your insurer that you have a situation or condition that qualifies you for a premium waiver. That might mean having your doctor send over specific documentation about a diagnosis, for example, or submitting proof that you’re unemployed.
At that point, a waiting period begins. Most waiver of premium riders only kick in after six months. You’ll need to continue paying your premiums during that waiting period. That means these riders are only effective for longer-term situations.
If the waiting period ends and your insurer deems your situation sufficient to qualify for the waiver, they will usually refund the premiums you paid during the waiting period.
From that point on, in order to keep the premium waiver in effect, your insurer will require new proof that your qualifying situation persists. To keep the waiver active, you might be required to submit new evidence from your doctor every six months or so, for example.
Guidelines for getting this rider
These riders present a fairly sizable risk for the insurer, so insurance providers limit who can get them. For starters, most companies only offer them when the policy is initially issued. If you already have a policy in place, you may not have the option to add this rider now.
Beyond that, insurers generally only extend these riders to people who are in good health and under a certain age cutoff (e.g., 65).
You can’t already be in the situation that would activate the rider, too. If you’re already living with a disability or a preexisting condition, you generally won’t be able to qualify for a disability waiver of premium rider. And if you’re not currently employed, you won’t be able to get an unemployment waiver of premium.