What is Waiver of Premium Rider in Life Insurance & How it Works?

Under uncertain circumstances, when you are unable to pay premiums due to any unexpected situation, waiver of premium rider saves your coverage and keeps it active.  

This rider waives off the future premiums and assures the policyholder that their insurance coverage will remain intact even if they become disabled or unable to work due to illness or injury. 

Let's talk about the waiver of premium rider in detail and understand how it offers protection during such hardships. 

A waiver of premium rider is an add-on that allows the premium payments on a policy to be waived in unusual circumstances, like if the policyholder becomes disabled, critically ill, physically impaired, and unable to work and earn.

This can provide valuable financial relief while keeping the financial protection of insurance intact during a difficult time.

It is one of the most critical riders in life insurance to add to your policy that will enhances the coverage. However, while claiming this rider, proof of disability or illness is required. The terms and conditions of this rider may vary depending on the insurance company and the specific policy.

This rider typically comes into play if there is an unusual condition where the policyholder can’t make the premium payments, and the condition is covered under the rider. 

Here are the main steps showing how a claim of waiver of premium rider works:

1. Proof of Condition

2. Premium Payments

An Example of Waiver of Premium Rider Working:

Let's consider the case of Mr. Bhattacharya. 

Mr Bhattacharya has a term insurance plan of 1 crore for a policy term of 25 years. 

Let’s consider the following different cases: 

1. Mr. Bhattacharya pays his premium regularly and passes away in the 16th policy year. In this case, his family will be paid a complete death benefit of 1 crore. 
2. Mr Bhattacharya lost his hands in an accident, thus losing his job and being unable to pay his premiums for several months. He had no waiver of a premium rider added to his policy. In this case, his policy will lapse, and no benefit will be paid to his beneficiary in case of his death. 
3. In the above case, if Mr Bhattacharya has a waiver of a premium rider added to his policy, his policy will continue, and in case of his death, his beneficiary will receive the death benefit. 

Thus, a waiver of premium rider can provide valuable protection for those who want to ensure their life insurance coverage remains in force even if they become disabled and unable to pay premiums. 

1. Cost

2. Eligibility

3. Limited Coverage Period

4. Exclusions

5. Waiting Period

There is a waiting period, usually of six months before the waiver of premium rider takes effect.

A careful consideration of these disadvantages and evaluation of your personal health, financial situation and other factors is essential to determine if this rider is a suitable addition to your insurance policy.  

The exclusions under the waiver of premium rider are almost the same as the list of exclusions under any life insurance policy or rider. Some of the common exclusions are:  

• Disabilities or medical conditions stemming from pre-existing conditions.
  
• Injuries or disabilities resulting from self-inflicted harm or suicide
• HIV/AIDS, congenital diseases
  
• War or Military Service
• Alcohol or Substance Abuse
  
• Medical condition due to participation in criminal or unlawful activities
• Injuries resulting from sports or adventurous activities like skydiving
  
• Some high-risk professions like aviation, firefighting, etc.

1. Individuals with Dependents or High Financial Obligations

2. Self-Employed Individuals with a Single Source of Income

For self-employed individuals, especially the ones with a single source of income, it’s not easy to take a leave from their work since its their sole source of income. In case of disability or unexpected illness when they are unable to earn and family struggles with finances, the premium for insurance might be an added strain on the already struggling family.

Thus, this rider can act as a relief ensuring that their policy remains in force without putting a financial strain on their family.

3. Individuals with High-Risk Jobs

4. Individuals with a History of Illness

While the eligibility conditions might vary across insurance providers, some of the most common eligibility criteria are as follows:  

• The applicant must be in the age limit of 18-60 or 65 with some insurers.
  
• Pre-existing conditions or disability is usually excluded.
  
• The eligibility largely depends on overall health, employment and lifestyle, considering potential risks.
  
• Financial underwriting is another major component of eligibility. Insurers may assess your financial situation to determine if the rider is appropriate for your policy.

Apart from these common criteria, the eligibility also depends on the insurer guidelines and the policy type.  

The documents required for a waiver of premium rider claim might vary across insurers. However, typically, the following documents are required:  

• Completed claim form
• All policy documents in original
• ID Proofs and Address Proofs (Aadhar card, Voter ID, PAN card)
• Medical reports and hospital records showing the health condition of the insured.
  
• Certificate of disability from an authorised government body
• Copy of Bank Passbook

1. Understand the Purpose and its Requirement for You

2. Eligibility Requirements

3. Cost Implications

4. Exclusions

5. Duration of Waiver

6. Waiting Period

Be aware of any waiting period before the waiver takes effect. Most insurers provide this rider with a waiting period of 6 months.

A waiver of premium rider is an excellent addition to any life insurance policy, at a nominal cost. It ensures that your coverage remains active, even during a period of disability. The peace of mind that comes with knowing that your family's financial future is protected is priceless. For those who want to safeguard their family's future, a waiver of premium rider is a must-have.

Read More: Importance of Riders in Life Insurance