Should I Add a Waiver of Premium Rider to My Policy?
Have you seen the term, “Waiver of Premium” while out comparing life insurance quotes? You may hear this term quite a bit. This is an important bit of information to pay attention to as you shop. An opportunity to add many riders to your policy is always available – this particular rider may be one you don’t want to skip.
Life insurance companies want to do whatever is necessary to keep a client’s account in good standing, through sickness or health. For many, not adding this waiver to a policy can be costly in the case of a personal illness or catastrophe.
What happens when a policyholder becomes ill or disabled? Ordinarily, not being able to keep up with your premiums will render your policy canceled. Meaning, you either lose your life insurance benefit or there’s a return of premium, with return amount and associated fees vary based on your policy terms.
Imagine this scenario: a policyholder pays for a life insurance policy for many years, then becomes disabled in an accident. The policyholder can no longer make required payments to keep an account in good standing, and it’s clear the accident or disability may render the policyholder incapacitated for a long period of time. What do insurance companies do in this case? Does the policyholder simply lose previously paid premiums with no recourse?
A waiver of premium rider ensures premium payments can be “skipped” for a specific period of time laid out by the rider in the event of a serious accident or illness. For those who become sick or disabled, this waiver allows the policyholder to retain benefits until the situation is resolved. The anticipation with this rider is the policyholder will at some point be able to return to work, or to making payments after a specific grace period.
Can you get a waiver of premium provision? First, it depends on your state. The waiver of premium provision is not available in all states, and there are typically minimum and other age requirements. Common age restrictions stipulate the policyholder must be 18-60 years of age, with most states ending this rider benefit at 65.
The reason for this is due to proximity to death benefits— older people who become ill or disabled have a greater chance of passing away or not recovering from their injuries, which means the death benefit would be released to the beneficiary.
This rider is optional and does come with additional fees that are either bulked into the premium or charged to the policyholder upfront. Each state has different rules and regulations about the waiver and disbursement. Typically, there is no limit to the number of times this rider can be used. This is especially beneficial to a policyholder if they have a chronic illness which prevents them from working for long periods of time.
In many cases, preexisting conditions mean utilizing this rider is off-limits. The waiver may also be restricted based on certain high-risk behaviors or professions. High-risk professions that carry a higher than average possibility may exclude certain policyholders from this waiver. Some examples include operating heavy machinery, certain types of labor or exposure to pathogens, etc.
Certain hobbies may also preclude the availability of this waiver, including hobbies such as skydiving.
A policyholder must wait six months for the waiver to kick into effect after a disability or injury. During this time period, payments must still be made. An ongoing disability or injury may waive future waiting periods. For instance, a chronic illness that requires frequent hospitalization may not require a waiting period after the first hospital stay. Quite often, hospital stays are used to determine the policyholder’s ability to work and bring in income, although this varies from policy to policy.
Because claim requirements vary from state to state and based on policy, it’s always best to check with your agent on the specifics of rider options available to you. The waiver of premium rider allows the policyholder to retain the policy and not lose funds already invested into life insurance, or tor receive less cash upon cancellation than the actual policy value. If available to you, it can be a serious win-win and the protection is worth the cost.
If you have questions about Waiver of Premium eligibility in your state or based on age or profession, contact us. We’ll know the specifics on what could potentially affect your eligibility to obtain a waiver of premium rider, and we’ll discuss whether or not this option is appropriate for you given your specific situation.
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