What is a Waiver of Premium Rider?

Life insurance protects your family, but what protects your life insurance policy? If you were to acquire a disability, you may find it hard to pay your premiums and maintain the coverage.

This is where the waiver of premium rider can prove immensely useful. It keeps your policy active should you sustain an injury or illness resulting in disability and are no longer able to pay your premiums.  

Keep on reading to find out more about this life insurance rider and how it works.

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What is a Waiver of Premium Rider?

A waiver of premium rider is a rider in an insurance policy that waives premium payments if the policyholder becomes critically ill, seriously injured, or physically disabled.

A waiver of premium rider is an extra benefit that you can add to your insurance policy for a small fee. With this rider in place, the insurance carrier waives off your premium payments if you acquire disability. This allows you to keep your insurance coverage even if a serious injury or illness forces you out of work.  It may be possible to pay for a waiver of premium rider even if you already have a pre existing condition although, it will cost more.

The provider will keep your life insurance coverage active up to a certain age. Generally, the limit is 65 years, but it can vary from one insurer to the next. Should you be able to return to work before you reach the age limit, the premium benefit provided by the rider will end.

How Waiver of Premium Rider Works?

A life insurance rider is an additional benefit that you can add to your policy at the time of its purchase at an extra cost. Riders allow you to enjoy more comprehensive coverage. One such add-on is the waiver of premium rider. Although some policies have this rider built into them, generally speaking, you can purchase this rider when you buy a new life policy for a flat fee.

The cost of the rider depends on your insurer, age, health, and other risk factors. The younger and healthier you are, the lower the cost. Adding this rider to your base policy may bump up your monthly premium rate by $10 to $50.

However, this rider might not be available to everyone. For instance, if you are over the waiver’s maximum age limit, the insurer will decline your request. Likewise, if you have a pre-existing disability, you will not be able to add the rider to your base policy.  

Waiver of premium riders add some difficulty to purchasing life insurance. Contacting an advisor can help guide you through the process.

To activate the waiver of premium rider, you need to:

• Submit a disability claim

• Make premium payments during the waiting period

The waiver of premium rider does not kick in from the day you sustain injury or illness resulting in disability. Generally, there is a small waiting period, defined as the period between when you sustained your disability and when the rider benefit begins. Usually, the waiting period is six months, although it can be longer or shorter than that (depending on your provider).

You must continue to pay the premiums during the waiting period (also known as the elimination period) to keep the insurance policy in force. If your claim is processed, the insurer will refund the premiums paid during this period.  

There are several requirements for filing a waiver of premium rider claim. Although these vary from one provider to the next, most require the following two things:

• A physician’s statement – A physician must sign a statement which states that the insured has sustained a disability. The document will state when the disability or injury took place and that the concerned person is not fit to work.

• Claim form – To get the claim, you will need to complete a waiver of premium rider claim form. Some companies let you complete and submit a claim form online while others require you to fax or mail back the completed form.

To qualify for a waiver, it is necessary that your disability meets the insurer’s definition of disability. Plus, your age should be lower than the maximum age limit set for this rider, usually 65 years.

Meeting the insurance company’s definition of disability is not always easy. Generally, for that you need to have a sustained an injury or illness classed as total disability. For most insurers, this means:

• You are unable to perform the primary duties of your existing occupation

• You are unable to work in any occupation that you are reasonably qualified for depending on your education and experience

Each insurance carrier has its own guidelines regarding how to qualify for the waiver of premium rider and which injuries or illnesses are excluded. Make sure you are aware of these details when you buy the rider.

When Does a Waiver of Premium Rider Apply?

Your insurance policy will list the conditions for this rider. Typically, it mentions how long the waiting period is going to be. You will have to pay premiums during the elimination period to ensure your policy does not lapse. If your disability is still ongoing at the end of the waiting period, the insurer will waive the premium payments. You will also be refunded the premiums that you paid during this period.

Your policy will also state how disability is defined. Life insurance policies typically use either of these definitions — own occupation and any occupation.

An own occupation policy is the more lenient of the two. With own occupation, you will qualify for the premium waiver if your disability means you can no longer perform the main tasks of your current occupation. This means, the insurer will waive your premiums even if you take a similar job in a similar field.

By contrast, in the case of “any occupation” definition, you qualify only if your disability keeps you from working in any occupation for which you are reasonably qualified. In other words, you are considered to receive the waiver for premium only if you are unfit to work in any occupation that you are reasonably qualified for.

For example, let’s say you are a surgeon but have injured your dominant hand. As a result, you are now unable to perform surgery. However, you can work as a lecturer at a school or in an administrator role. In this case, you will be eligible for a waiver of premium only if your policy follows the “own occupation” definition for disability.

What are the Benefits of a Waiver of Premium Rider?

More than one in five Canadians aged 15 and over have one or more disabilities. That goes to show disability is more common than many might think. So, buying additional coverage that offers protection in the event of disability makes sense.

Should a person lose employment due to disability, paying the life insurance premiums could be tough. However, since a life insurance policy helps protects your family’s future, the decision to go without it is not easy either.

If you buy the waiver of a rider, thankfully, you will not have to make that decision. It keeps your policy active even if you cannot pay premiums due to disability. And if your policy includes a savings component, it can help maintain the cash value. With the waiver of premium add-on, you will not have to use your cash value for paying premiums.

Beneficial as the rider is, it is not a replacement for disability insurance. The latter pays your monthly premium benefits that can help you cover all your expenses and bills, not just premiums. Plus, qualifying for it is relatively easier than the waiver of premium rider.

Also, the waiver of premium rider makes more sense if you are young and healthy and want to buy coverage that will last many years. As we mentioned earlier, the cost of the add-on depends on your health and age, among other things. So, the younger and healthier you are, the less the rider will cost you.

How to Purchase a Life Insurance Policy with a Waiver?

Riders are additional features that provide extra benefits, over and above what the base policy includes. A waiver of premium rider takes the responsibility of paying the premiums off your shoulders in the event of disability.

If you sustain a disability and can no longer purchase premiums, the insurer will waive them for the duration of your disability. This rider is among the most popular add-ons that new policyholders buy. You can purchase this rider for a small fee when you buy a policy. In most cases, you cannot add the rider afterward. The rider includes underwriting approval. If you have a pre-existing disability, you will not qualify.

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Conclusion

A waiver of premium rider is an important add-on that you can purchase for a small fee. In the event of disability, the insurer will waive the life insurance payment of premiums. However, it does not provide the level of protection disability insurance offers.

Life insurance experts at Dundas Life can walk you through all the available options so that you get the exact protection that you need.