Simplifying Life Insurance in India
Waiver of Premium Rider in Life Insurance
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.
What is a Waiver of Premium Rider?
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.
How Does a Waiver of Premium Rider Work?
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
Since the basic premise of the rider is to cover unusual situations, it requires proof of a situation like disability. The most accepted document is the doctor’s certification stating that the policyholder cannot work due to the mentioned disability.2. Premium Payments
Once the disability is verified, with all other terms and conditions in place, the rider waives the premium payments for the duration of the disability. This allows the policy to remain active, and the beneficiaries receive the complete death benefit in case of the policyholder’s unfortunate death.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:
- 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.
- 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.
- 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.
What are the Benefits of Waiver of Premium Rider?
Some of the major benefits of waiver of premium rider are:
1. Uninterrupted Coverage
The foremost and primary benefit of a waiver of premium rider is that it ensures that your life insurance policy remains in effect even if you cannot pay the premiums due to a disability or illness.
Thus, when you have multiple things to look after at a crucial stage of health, you don't have to be concerned about losing out on the financial protection you bought for your family.
2. No Financial Burden
With the waiver of premium rider, you don't have to worry about paying the premiums during the period of disability. The rider ensures that your policy coverage continues without any financial burden.
3. Prevents Policy Lapse
By signing up for a life insurance policy, you have made a long-term financial commitment to protect your family's future. A waiver of premium rider helps protect this investment by ensuring that your policy does not lapse on grounds of non-payment of premium during a period of disability.
4. Peace of Mind
Often ignored, but a critical benefit is the peace of mind that this rider provides. Knowing that your life insurance coverage, i.e., your well-planned financial protection for your family, will continue, regardless of your ability to pay premiums, is a significant benefit.
5. Cost-effective
This rider can be added to the base policy for a nominal cost. But the benefits that it provides are nonpareil. It is a cost-effective way to ensure that your financial 'coverage remains in force, even during a period of disability. Thus, a small cost can offer significant benefits in the long run.
What are the Disadvantages of Waiver of Premium Rider?
1. Cost
While it provides manifold advantages and an enhanced safety net, this rider does increase the overall cost of your insurance policy. You need to assess whether the additional premium aligns with your financial planning and goals.2. Eligibility
Qualifying for the waiver involves certain eligibilty checks. You might not qualify for adding the rider or there might be delays or denials in approval if the insurer deems the disability does not meet their specified conditions.3. Limited Coverage Period
Riders, as other insurance policies, come with age limitations. For instance, the rider may only cover you until you reach a certain age, such as 60 or 65. This means that if you become disabled after this age, the rider will not be effective.4. Exclusions
The rider often includes specific exclusions. Common exclusions might encompass disabilities resulting from certain activities or conditions.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.
Exclusions Under Waiver of Premium Rider
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.
Who Should Buy Waiver of Premium Rider?
1. Individuals with Dependents or High Financial Obligations
People with dependents who rely on their income and have high financial obligations like loans, must add this rider to their policy. Thus, they have the security of coverage continuity even in cases when they are unable to earn due to any disability or unexpected illness.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
If you are into a high-risk profession such as miners, police officers, drivers, pilots, etc., you must consider adding this rider to your policy. These jobs pose a risk of injury that might result in disability or death. Thus, waiver of premium rider can provide added protection in case of an accident or injury that leaves you unable to work and pay your premiums.4. Individuals with a History of Illness
Individuals with a history of illnesses carry a higher risk of having the same illness. Adding the waiver of premium rider can provide added protection and peace of mind in case they end up with an illness and are unable to pay their premiums.Eligibility for Buying Waiver of Premium Rider
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.
Documents Required to Claim Waiver of Premium Rider
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
Factors to Consider When Buying Waiver of Premium Rider
1. Understand the Purpose and its Requirement for You
Understand how this rider can be useful to you. If you fall under certain categories, like you are the sole breadwinner, have a family history of critical illnesses, this rider can be a necessary addition.2. Eligibility Requirements
Check the eligibility requirements of your insurer, that you must meet to buy this rider. These requirements may vary across insurers.3. Cost Implications
Assess the additional cost of adding this rider to your policy and determine if it fits your budget and is aligned with your coverage goals.4. Exclusions
Check and evaluate the conditions or types of disability that are covered and any exclusions that may apply. Knowing the exclusions beforehand is necessary to be better prepared for handling a financial emergency.5. Duration of Waiver
Know how long the waiver lasts. Some policies may cover you until a certain age or for the life of the policy.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
FAQs About Waiver of Premium Rider
Is there a waiting period to avail waiver of premium rider?
What happens if the policyholder recovers from the disability or illness?
Can a waiver of premium rider be used multiple times?
Is waiver of premium available on term insurance?
Is the Waiver of Premium rider available for all life insurance policies?
Is the premium paid for the Waiver of Premium rider tax-deductible?
Can the Waiver of Premium rider be added to an existing life insurance policy?
What happens if I cancel my Life Insurance policy with a Waiver of Premium Rider?
How do I know if the Waiver of Premium Rider is right for me?
How does the Waiver of Premium Rider affect my Life Insurance coverage?
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
