Understanding the Life Insurance Waiver of Premium Rider

Protecting loved ones in the event of their demise is something every person wishes to do. They don’t want to be a financial burden on their family and friends when they pass away, and a life insurance policy can help to ensure this is not the case. However, people need to be aware of the various riders that may be added to a policy of this type to ensure they get the coverage they want and need. Buyers often look at the accelerated death benefit and disability waiver of premium riders when making this purchase. Nevertheless, the life insurance waiver of premium rider should also be investigated. What should one know about this rider when making their decision?

The Waiver of Premium Rider

Often referred to as the waiver of premium for disability, the waiver of premium rider is an option for individuals purchasing life insurance. In the event the insured becomes unable to make his or her payments due to an illness or injury that prevents him or her from working, the rider covers the payments. The person must have a catastrophic life change, such as a permanent illness or severe injury that leads to the disability before it is enacted. 

People need to look into obtaining this optional coverage as 20 percent of Americans now live with a disability. The rider ensures they aren’t forced to use their limited income to pay the premium on the life insurance policy. The policy remains active and the funds can be used for other purposes. While this does cost extra and is based on the individual’s health at the time of purchase and the likelihood of him or her becoming disabled in the future, it is an option to be considered. 

Read the Fine Print

There is no standard when it comes to the waiver of premium rider benefit, thus men and women interested in purchasing this coverage need to read the fine print. When activated, the policyholder pays no fee for use of the benefit, and multiple claims may be filed. However, claims cannot be filed in the first six months following the purchase of the rider.

Benefits end when the policyholder is able to return to work. However, if a person suffers from a long-term disability, the benefits typically end when he or she reaches a specific age. Read all of the stipulations with regard to the waiting period. For example, if a person finds he or she must file a claim for a recurring disability, the waiting period may not be required. Furthermore, the claim filing process differs by the insurer, so be sure to review this information before making a purchase.

Who May Obtain This Coverage?

Individuals between the ages of 18 and 60 usually find they are offered this type of coverage if they do not have a pre-existing disability. However, be aware the coverage is only available when the policy is initially purchased. It cannot be added at a later time. In addition, a person may find he or she no longer has the added coverage once a certain age is reached. For instance, some companies end the waiver of premium rider coverage when the policyholder turns 65, as he or she would likely retire and stop earning an income at that time. For this reason and many others, reading the fine print is crucial when purchasing any type of insurance. 

A family with limited funds often finds it benefits significantly from having the added coverage, as the life insurance will remain in effect even when they are struggling to meet other obligations as a result of the family member’s inability to generate income due to the disability. They retain the coverage without having to pay for it. 

The Cost

Individuals often wish to know how much they will pay for the added coverage. To determine this, an insurer looks at the purchaser’s age and physical health because the rider is meant for unforeseen disabilities, not those that are extremely likely to present themselves. Most people find they can easily afford the additional coverage, as it tends to run 15 to 25 percent of the monthly premium. For example, someone paying $18 a month for their policy would find the rider would cost them an additional $2 to $5 each month. Nevertheless, the final cost depends on the applicant’s age, occupation, health history, and preferred activities.

An applicant should take many things into consideration when determining if he or she needs to obtain this additional coverage. While it is impossible to predict the future, a person can make an educated guess as to their financial resources over the long term and their priorities. As 20 percent of individuals now suffer from a disability, a person should take this into consideration and determine if they feel they can afford to bypass this protection. Quite a few find it provides them with peace of mind, which no price can be put on. 

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