Waiver Of Premium
What Does Waiver Of Premium Mean?
A waiver of premium is a provision or clause in an insurance policy that exempts the policyholder from the obligation to pay further premiums under specific conditions. In life insurance, this provision waives the premium payment if the policyholder becomes seriously ill or disabled.
This is one of the most popular and significant riders, as it allows individuals to maintain the benefits of an insurance policy even if they are unable to work. With this benefit, the policy remains active without lapsing, even when premium payments stop.
It is also referred to as a waiver of premium rider or a premium waiver benefit.
Insuranceopedia Explains Waiver Of Premium
A waiver of premium rider is an optional benefit available with various insurance policies, though it is most commonly offered on term life insurance and other permanent forms of coverage. For an additional fee or increased premium, many insurance companies will add a waiver of premium to a policy.
The cost of a waiver of premium rider varies across insurance companies and may also depend on the insured’s age at the time of policy issuance. The fee can be assessed as a one-time charge when the policy is issued or may be collected on a monthly or annual basis. Typically, the average cost is no more than a few dollars per hundred thousand dollars of the policy’s face value per year.
To qualify for a waiver of premium, insurance companies set specific requirements. In a life insurance policy, for example, the policyholder must usually be incapacitated for a specified period, such as six months, to be considered disabled. Other qualifications may include being in good health and under a certain age at the time of policy issuance.
