Waiver of Premium
Definition - What does Waiver of Premium mean?
A waiver of premium refers to a provision or clause in an insurance policy that relieves the policyholder of their obligation to pay any further premiums under certain conditions. In the context of life insurance, it waives the premium payment in case the policyholder becomes seriously ill or disabled.
It is one of the most popular and important riders as it allow people to benefit from an insurance policy, even when they are unable to work. Through this benefit, the policy never lapses even when payment ceases.
It is otherwise known as a waiver of premium rider or a premium waiver benefit.
Insuranceopedia explains Waiver of Premium
A waiver of premium rider is an optional benefit among various insurance policies. However, it is most commonly found on term life insurance policies and other permanent forms of insurance coverage. For an additional fee or an increased premium, most insurance companies will incorporate a waiver of premium into a policy.
The cost of having a waiver of premium rider varies from one insurance company to another. It may also differ depending upon the insured’s age at policy issue. It can be assessed as a one-time charge upon the issuance of the policy or may be collected monthly or annually. Usually the average cost is not more than a few dollars per a hundred thousand dollars of the face value of the insurance policy per annum.
To avail of a waiver of premium, insurance companies prescribe some requirements. In a life insurance policy, for instance, a policyholder to be considered as disabled must be incapacitated for a certain period of time, such as six months. Other qualifications include the policyholder being healthy and below a certain age.