If you’ve ever been concerned about how you’ll pay your life insurance premiums if you become disabled, relax – there is a workaround.
It’s referred to as the waiver of premium rider, and it’s designed specifically to cover your life insurance premiums should you become disabled.
It can be particularly valuable if you work in certain high risk or higher risk occupations, where the likelihood of disability is greater.
What is a Waiver of Premium Rider?
A waiver of premium rider is an optional provision in a life insurance policy, though some policies do offer it as a standard inclusion. (But never assume this to be the case.)
The waiver of premium rider has a single purpose: it covers your life insurance premiums if you become totally disabled.
That’s an important distinction because the benefit will not apply if you are only determined in the partially disabled.
In most cases, the rider must be included at the time of application, and cannot be added after the fact.
How It Works
The waiver of premium rider is typically available to life insurance applicants between the ages of 18 and 60 and will generally terminate by age 65.
The reason for 65 as the age of termination is that the rider is specifically designed to provide protection against lost income. Presumably, you are retired by age 65, and disability will no longer be a factor.
The rider typically comes with a six-month waiting period. That will apply beginning on the date that you become disabled.
You will be required to continue making your life insurance premium during the waiting period. However, you will be reimbursed for the premiums paid at the end of the waiting period.
There’s only one waiting period per disability incident. For example, if you slip and fall on the job, and become disabled, there will be one waiting period for that particular disability causing event.
If you’re subsequently disabled due to the same injury, you will not incur a new waiting period. However, if you become disabled for a different reason, a new waiting period will be implemented.
In addition, the waiver will only apply for disability incurred after the policy is in force. If you are already disabled, and apply for a new policy, you’ll still be required to make your premium payments.
In some cases, a waiver of premium rider may be provided at no additional cost. If that is the case, it’s most likely to happen if you work in a very low-risk occupation, where the likelihood of incurring total disability is minimal.
Otherwise, how much additional premium you will pay will be determined by the type of policy you take. For example, while the cost of the rider may be no more than 5% on a whole life policy, it can range between 10% and 15% in the case of term policies.
Other factors that can affect your premium increase will include your overall health and any high risk hobbies you participate in, since either can result in disability.
But an even more significant premium factor is your occupation. Though a waiver of premium rider is an advantage if you are in a high-risk occupation, there are some occupations that have an even higher risk that may affect the premium you will pay.
Why You Might Consider Adding a Waiver of Premium Rider to Your Policy
Keeps Your Life Insurance Policy in Force Even if You Can’t Pay the Premiums
Should your income become disrupted due to disability, you would at least have the peace of mind of knowing that your life insurance policy will remain in force even if you can’t make payments.
Even though you may be receiving some form of short-term disability benefits, it can still be difficult to cover life insurance premiums on a budget tightly stretched to cover other expenses, including those related to the disability.
The waiver of premium rider removes that issue.
More Valuable for Applicants with Tighter Budgets
If you have substantial financial reserves, you may not want to pay a higher premium for the waiver of premium rider.
It’s likely you’ll have the funds available to make your premium payments even if you are disabled.
But if you have little in the way of savings or other financial resources, the waiver of premium rider would remove the life insurance premium from your budget completely during your time of disability.
Keeps Your Life Insurance Policy from Lapsing!
Since it doesn’t provide an immediate benefit, life insurance is often among the first financial services to be eliminated during a crisis. You may determine that there are simply too many other more immediate expenses, like housing, utilities, and food.
But if you fail to make your life insurance policy premiums, your policy will lapse.
That will not only leave you with no life insurance coverage at all, but you may be in a situation where getting a new policy after the fact will either be prohibitively expensive, or even impossible – perhaps even as a result of your disability.
After all, it’s not uncommon for a severe disability to even reduce a person’s expected lifetime.
It can be Especially Valuable if You Work in a Higher Risk Occupation
A waiver of premium rider can be especially important if you are in a higher risk occupation, since such occupations typically increase the likelihood of disability.
This can include occupations such as truck drivers, convenience store clerks, bartenders, couriers, flight attendants, nurses, postal workers, trash collectors, waiters, and furniture movers.
How to Add a Waiver of Premium Rider to Your New Life Insurance Policy
In nearly all cases, you’ll only be able to add a waiver of premium rider to your policy at the time of application. It’s a common insurance rider and will be available on most policies with most companies.
If you’re specifically interested in the waiver of premium rider, and especially if you have a high-risk occupation, a high-risk hobby, or a health condition that may make it more difficult or costly to add to the rider to your application, you’ll need to work with a life insurance broker.
As life insurance brokers, we work with dozens of different life insurance companies. Because of that, we know which companies take the most favorable view of the many different occupations, hobbies, and health conditions millions of people commonly have. That will save you the trouble of finding which companies will work best for you.
In fact, if your application or profile will in any way depart from the young applicant, in excellent health, and in a very low risk occupation, working with a life insurance broker is always the better way to shop.
The very low life insurance rates you see advertised on the Internet are designed only for the most qualified applicants. If you depart from that profile in any way, you will find yourself paying a higher premium than you need to, or even having your application rejected.
You can also rest easy in that while our experience in the life insurance industry is likely to get you into the customized policy you want, at the most affordable premium, you won’t pay anything extra for our services.
That’s because we’re compensated directly by the life insurance companies for placing your application, and at no additional cost to you.*While we make every effort to keep our site updated, please be aware that "timely" information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Huntley Wealth & Insurance Services and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.