Waiver of premium

Waiver of premium is a rider that suspends premium payments while the insured is totally disabled, as defined in the contract. The insurer keeps the policy in force, and for permanent policies, cash value and dividends typically continue as if premiums were being paid. Some group plans include a similar disability waiver.

Claims usually require a waiting period, commonly six months of continuous disability, after which premiums paid during the wait are often refunded. The disability must typically begin before a stated age, such as 60 or 65. Definitions matter: some riders pay if you can't do your own occupation for an initial period, then require that you can't work in any job suited to your education and experience. Hypothetically, if a 42-year-old paying $150 a month on a 20-year term policy becomes disabled and qualifies, the insurer would waive $1,800 a year for as long as the disability lasts, possibly until the term ends.

The rider is most valuable for people whose income would stop if they couldn't work and whose disability coverage is limited. Check its cost, the definition of disability, the age limits, and whether a universal life version waives only a specified premium rather than all monthly charges. See waiver of premium riders: what they cover and when they pay and life insurance vs disability insurance: which to buy first.