Definition of Premium Waiver Rider
How does the Premium Waiver Rider work
Requirements for the Premium Waiver Rider
How much does the Premium Waiver Rider cost?
Premium Waiver Rider vs. Disability Insurance
Definition of Premium Waiver Rider
The Premium Waiver Rider is an optional addition to an insurance policy where the insured agrees to waive premiums after an initial waiting period if they become totally disabled before a certain age, such as 60 or 65 years. While no one expects to become disabled, especially if they are currently in good health, statistics show that it happens frequently enough to be taken seriously. Data from the Centers for Disease Control and Prevention (CDC) indicates that 26% of adults – 61 million people – in the United States live with a disability. Here, we will explore the details of the Premium Waiver Rider to help you decide if it is something you want to add to your upcoming insurance policy.
How does the Premium Waiver Rider work
The specifics of how the Premium Waiver Rider works vary by policy, but there is usually a waiting period of six months (or an exclusion period) during which you must be continuously disabled before your rider starts covering your premium. Once the waiting period is over, the insurer may reimburse the payments you made during that time. You also will not have to pay any additional fees to start using these benefits or while they are in effect.
If your policy has a cash value, it will continue to grow while the insurer waives premiums. The earnings will also remain accessible. In other words, your policy continues as if you hadn’t missed any payments.
You can file more than one claim if you become disabled again later, but you will still be subject to your waiver rider’s waiting period. If you file another claim due to a recurring disability, the insurer may waive the waiting period requirements.
In cases of long-term disabilities, some insurers only waive premium payments up to a certain age. They will waive premiums for the full duration of the disability or the lifetime if the disability lasts for a specified amount of time.
Requirements for the Premium Waiver Rider
If your insurance company offers a Premium Waiver Rider, you typically need to be under the age of 60 or 65 and have no pre-existing disabilities to qualify. Approvals may also depend on factors like your overall health, occupation, and hobbies.
When filing a claim, your Premium Waiver Rider specifies the acceptable documentation. You may need data from your doctor and social security administration proving that you are unable to work. You will submit your documentation along with any other required forms with your claim request.
How much does the Premium Waiver Rider cost?
The cost of the Premium Waiver Rider depends on factors like your insurance company, location, age, health, and the type of policy. For example, Progressive indicates that the cost ranges from 10% to 25% of your life insurance premium.
Premium Waiver Rider vs. Disability Insurance
The Premium Waiver Rider and disability insurance are similar in that both provide financial assistance during a disability. You can also purchase either option yourself or have them provided by your employer as part of your benefit package. However, the Premium Waiver Rider and disability insurance serve different purposes. The waiving rider simply allows you to forgo paying your life insurance premium, while disability insurance pays you a percentage of your lost income. For example, Aflac offers a short-term disability insurance policy that pays between $500 to $5000, depending on your income. The same policy will start paying you within 14 days after you become disabled, while long-term disability insurance may take three or six months and the Premium Waiver Rider usually requires a waiting period of more than six months.
And while
A waiver of premium rider is usually not very expensive; disability insurance may be free if you have enough work credits and pay Social Security taxes on your income. You may also receive disability insurance for free or at a low cost through your employer. Otherwise, obtaining a privately purchased policy may be much more expensive than a waiver of premium rider, costing anywhere from 1% to 4% of your annual income. This can amount to $82 to $167 per month for someone earning $85,000 annually, depending on their age.
Takeaways
A waiver of premium rider waives your insurance payments when an injury or illness prevents you from working. It is a very popular option for life insurance policies, and you can only add it to your policy when you first enroll. You typically need to be under 65 years old and not have any pre-existing conditions to qualify. A waiver of premium rider usually starts waiving your premium after six months of disability, and during this time, insurers typically refund the premiums you paid during that period.
Source: https://www.thebalancemoney.com/what-is-a-waiver-of-premium-rider-5207782
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