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Waiver of Premium

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The Waiver of Premium rider

A common rider found in life policies

So you're going along through life and as a responsible person, you have your term life insurance policy safely in place to protect your family.  As a result of an injury or serious illness, you then become total disabled.  The good news is that you survived...the bad news is that you are disable and most if not all income has stopped.  There is disability insurance but it tends to be very expensive.  The Waiver of Premium rider may be just the right approach to addressing this issue.  Let's look a little deeper at this rider and how it works.

Total disability is a nightmare as anyone will tell you who's witnessed or been through it.  You take so much for granted in your every day routine that suddenly becomes critical when total disability hits.  To some extent, it may be almost as devastating as death to the family...especially in terms of financial matters which is where life insurance comes into play.  As the financial hurricane hits the family, you may not be able to afford your term life insurance monthly premium. This is where the Waiver of Premium rider comes into play.

Each life insurance company and policy is structured differently but essentially, the rider will waive the requirement to pay premium if the insured becomes totally disabled.  There's usually a waiting period before this waiver will take place.  For example, if the waiting period is 6 months, the waiver will not kick in until 6 months after the status of totally disabled is established.  This means you would still need to pay the premium for the first 6 months of disability status.  If you the insured continues to be totally disabled after the 6 month window, the premium will not be required for as long as the insured continues to be disabled.  Some life insurance carriers will even return the first 6 months of premium. 

One interesting aspect is the definition of "total disabled".  You want to double check with your carrier and plan of choice.  It usually touches on the ability of a person to perform the duties of their job as a result of injury of illness.  Sometimes there is a period (say of 18-24) months during which this applies.  There may be a separate definition after the initial period (say after 24 months) where the definition is expanded.  This means it's slightly harder to still qualify as disable although, if you're really totally disabled, you shouldn't have a problem with either definition.  This tightening of the definition usually changes the requirement from "your job" to "any job" suited to your education, training, or experience.  For example, as a surgeon who can no longer use his/her hands with the required dexterity, you still be able to do research or manage doctor groups ect. 

As you read in our term life insurance rider section, we're not always the biggest fan of riders.  It really comes down to cost.  If you start to add multiple riders even at a lower cost, you could be "nickled and dimed" when the final bill comes.  Each rider may seem inexpensive but you have to look at the underlying risk and probability that they address.  Waiver of Premium riders are usually so inexpensive that we feel comfortable with the additional cost versus the risk they address.  Again, it makes sense to double check the cost when you find the right plan, rate, and carrier for you as they will all offer different rider options at different costs.  We're happy to go through your particular situation once you have chosen the "core" life insurance benefit that fits.



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