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What Is a Waiver of Premium Rider?

Ashley Chorpenning
·5 mins read
Umbrella over bags of money
Umbrella over bags of money

If you’ve ever wondered how you would make your life insurance premiums if you were unable to earn an income, then you need to know about the waiver of premium rider. When an insurance policy features a waiver of premium rider, premium payments will be waived if you become disabled or seriously ill. The waiver of premium rider can help protect your family’s financial future if you become unable to work. Consider working with an expert financial advisor to determine if a waiver of premium rider makes sense for you and to chart out how your insurance strategy fits into your holistic financial plan.

What Is a Waiver of Premium Rider?

A rider on an insurance policy is an added benefit that requires a small additional premium payment. The waiver of premium rider is a rider that pays all of a policyholder’s life insurance premiums if that person becomes ill or disabled. Essentially, the policyholder is unable to work and therefore cannot pay the premiums due to a disability or illness. Without a waiver of premium rider, a person’s life insurance coverage could lapse if he were unable to make his premium payments.

How Waiver of Premium Riders Work

When a person takes out a life insurance policy, he can add riders to the policy. These waivers can include the waiver of insurance premium rider. To qualify for a waiver of premium rider, the policyholder must prove that he does not have a disability that prevents him from working. People with preexisting disabilities who are unable to work can’t qualify for a waiver of premium rider. The cost of the rider will vary between each applicant depending on age, health and other risk factors.

When someone qualifies for and purchases a waiver of premium rider, most insurers will write in a waiting period. During this period, policyholders are not able to claim the benefits of the rider. If the insured becomes disabled or seriously injured during the waiting period, the policyholder will likely receive a full refund of the premium payments already made. It’s important to note that waiver of premium riders are not available in all states.

When a policyholder files a claim and it’s approved, the insurer will use money from the insured’s death benefit to cover the premiums. This allows the policyholder to remain insured while only slightly decreasing their death benefit.

Benefits of a Waiver of Premium Rider

Patient with doctor
Patient with doctor

If a person becomes disabled or injured and is unable to work, he will likely have to cut his monthly, quarterly and annual expenses. Choosing which expenses to eliminate can be an emotionally and mentally challenging process. If he had purchased a life insurance policy to help guarantee his family’s financial well-being in the future, it can be a tough budget item to choose to eliminate due to the longer-term implications. With the waiver of premium rider, a policyholder does not have to make that decision.

It is important to note that some waiver of premium riders cover the industry that a policyholder is in when he becomes disabled, whereas others require policyholders to be unable to work in any field to get the benefit of the waiver of premium rider.

When purchasing a life insurance policy, a policyholder should speak with his insurance agent about what riders they might benefit from. It’s only possible to purchase this rider when taking out a policy, and a person must qualify for this waiver before purchasing it.

How to File a Waiver of Premium Rider Claim

There are several requirements for a policyholder to file a claim. While these vary by insurer, most policies require the following:

  • A physician’s statement. A doctor must sign a statement that says the insured is completely disabled. The letter will detail when the injury or disability occurred and that the person is unable to work.

  • Notice from the Social Security Administration (SSA). This notice from the SSA must also state the insured is unable to work. In some cases, an insurance company will accept this instead of a physician’s statement.

  • A completed claim form. The insurance company will provide a rider claim form upon request. The insured person is then expected to fill out the form and sign it. This form lets the insurance company know that they intend to use the waiver.

  • A signed letter. The policy owner must also sign a letter that states he or she is the one who intends to use the rider. This is sometimes used instead of a claim form, especially when the policyholder and the insured are the same person.

To submit a claim, the insured person must collect the information above, as well as any other information the insurer requires. Any additional requirements will be provided by the insurance company. Some insurance companies require policyholders to be completely disabled and unable to work for six months before submitting a claim.

The Bottom Line

Copy of life insurance policy
Copy of life insurance policy

A waiver of premium rider is typically a small monthly cost added to a person’s life insurance policy. It protects the policyholder in case he becomes unable to work due to disability or serious injury and are therefore no longer able to make his premium payments. The waiver of premium rider is one of the most popular riders in life insurance due to its benefit of protecting a person’s financial future even if he is longer able to pay their premiums.

Tips for Buying Life Insurance

  • Consider talking to a financial advisor about how much life insurance you might need and whether a waiver of premium rider is a good idea for you. If you don’t have an advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor free tool can match you with up to three local financial advisors. If you’re ready, get started now.

  • If you are looking for other ways to create savings and income for your later years, an annuity is another insurance product you may consider. An annuity lets you pay in premiums for a set period of time, then receive payments back later.

Photo credit: ©iStock.com/porcorex, ©iStock.com/Dmitry Belyaev, ©iStock.com/courtneyk

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