What Is Waiver of Premium Life Insurance?

Life insurance gives your loved ones financial protection, ensuring they have money to cover expenses if you die. To receive that peace of mind, you must pay a monthly premium. If you're not able to pay at any point, your policy could be canceled. Waiver of premium life insurance addresses this problem and may be beneficial for you.

What Is Waiver of Premium Life Insurance?

Waiver of premium life insurance refers to a policy that has a waiver of premium rider attached. A rider is an insurance add-on that changes the terms of an insurance policy or adds additional benefits. In the case of waiver of premium, the rider allows you to forgo making monthly premium payments under certain circumstances. Even though you don't have to continue paying your premiums, the life insurance policy remains in effect. If you die, your beneficiary would still receive the death benefit.

In What Situation Does a Waiver of Premium Provision Go Into Effect?

Life insurers set up their own terms for waiver of premium riders. Generally, the provision may go into effect if you:

• Become disabled
• Come down with a critical illness, such as one that requires ongoing palliative or hospice care
• Suffer a severe injury

In most cases, the disability, illness or injury must keep you from working or require you to take a different job that pays less money.

When Does a Waiver of Premium Rider Take Effect?

Most insurance companies only honor the waiver of premium if your disability, illness or injury makes you unable to work for a specific period, such as a minimum of six consecutive months.

Normally, a waiver of premium rider has a waiting period that begins at the start of the policy. If you become ill, disabled or injured during the waiting period, you won't be able to waive your premiums. Instead, the insurance company may cancel your policy and return the money paid in premiums up to that point.

Insurance companies establish claim requirements for return of premium riders. To make a claim and begin using the rider, you'll likely need to submit a signed letter from your doctor. If you've become disabled, you'll usually be asked for a notice from the Social Security Administration (SSA) that confirms your status.

Can You Get a Waiver of Premium Rider With a Preexisting Condition?

No, typically life insurers will only honor a waiver of premium of rider for something that happens to you after your policy takes effect. If you're already disabled or have a preexisting health condition that is likely to cause severe illness or disability in the future, you may not be able to get the rider.

Insurance companies may not offer waiver of premium riders to people over a certain age. Some states don't allow for the sale of waiver of premium riders. If you live in one of them, you won't be able to get coverage.

Why Is Waiver of Premium Rider Important?

A waiver of premium rider makes sure your loved ones will have access to a death benefit even if you become injured, disabled or seriously injured. When those unexpected health problems occur, your living expenses are likely to increase. You may need ongoing care or rack up medical bills. Maintaining your life insurance with a waiver of premium allows your beneficiaries to receive the death benefit to settle your expenses after you die. You won't have to worry about paying for the premiums while you're alive, and that money can be put toward your care.

Disabilities, terminal illnesses and serious injuries may prevent you from getting life insurance in the future. If you stop paying your premiums and your existing insurance is canceled, you may never qualify for another policy again. Waiver of premium enables you to retain your coverage.

What Is the Cost of Waiver of Premium Life Insurance?

With a term life insurance policy, a waiver of premium usually costs 15% to 25% of the monthly premium. If your monthly premium is $100, you'd pay an additional $15 to $25 for the rider.