A waiver of premium is a rider which can be attached to an insurance policy, typically a life insurance policy, ensuring that the policy will continue to be in effect even if the policyholder experiences a loss of income. These premiums are most classically used in life insurance so that the policy will fully mature and be available to the survivors of the policyholder when he or she dies. They may also be rolled into disability insurance policies, and other types of insurance.
Sometimes, an insurance policy automatically includes a waiver of premium clause, but in other situations, it will need to be added as an additional rider. An extra fee may also be charged to obtain the rider. People who view this option as important should talk to their insurance agent about the options, and confirm the terms and conditions associated with the rider.
When someone has a waiver of premium rider, it means that he or she will be allowed to stop making payments on the policy in the event of loss of income. The loss may be temporary, as might be the case when someone is sick or unemployed, or permanent, in the instance of a disability. In either case, the policy will continue to remain in effect even though the premiums are not being paid.
There may be associated restrictions, such as age and physical condition caveats, which could void the waiver of premium clause. For example, the policy may require that the policyholder be above and below a certain age, or that a physical exam confirm that the policyholder is healthy beyond the reason for the loss of income. It is critical to understand which restrictions may come into play, and to be aware of the fact that most people must lose their income for at least six months to be eligible for the rider to kick in.
These riders allow policyholders to receive benefits even in the event of a catastrophe. In the case of life insurance, the waiver of premium benefits the survivors more than the policyholder, as he or she must die for the insurance to pay out. Disability insurance, on the other hand, can be set up with a waiver of premium benefit to ensure that the policyholder will get benefits when he or she needs them.
As with all options related to insurance, it pays to shop around for a policy, to get the best deal in terms of cost and conditions. Insurance brokers can shop a client around to several insurance companies to provide several options, or people can do this research on their own. For people who are not familiar with the fine print of legal contracts, it can be beneficial to talk to a lawyer when establishing life insurance and other types of insurance polices.