Maybe you understand how life insurance can generally help individuals with disabilities, but you aren’t familiar with the riders offering the best supplemental protection.
For those looking for a tangible solution to disability coverage, the disability waiver of premium rider is an ideal place to start.
More specifically, the disability waiver of premium rider goes hand-in-hand with a disability income rider.
In either case, an injury or illness, whether unforeseen or not, readily prevents the insured from working at his normal occupation and therefore making a living.
This results in what is referred to as a total disability, which could, in turn, cause financial hardship for the insured’s family.
Add-on provisions, such as the disability waiver of premium rider, help ease any potential economic burdens by waiving the cost of life insurance and guaranteeing a monthly income for the insured and their loved ones.
What is a Disability Waiver of Premium Rider?
Riders add supplemental coverage to a standard life insurance policy to create a customized product for the insured for years to come.
Unlike the base policy on its own, this rider offers benefits to the policyholder while he or she is still living, also known as a living benefit.
In short, if he or she becomes disabled, the rider ensures they will not lose life insurance coverage since the insurer will pick up the cost of the premiums.
If the insured has secured some form of term life insurance, for example, it means his policy stays current.
Even if he has permanent life insurance, the same condition applies here. So long as he or she is diagnosed as disabled, the policy premiums are paid by the insurer, and the guaranteed death benefit cannot lapse.
The policyholder’s insurance will continue to function as if he or she is making the payments on their own.
In the case of universal or whole life, even the cash value will continue to accumulate over time. If he or she is earning dividends off of the policy, they will go on receiving them.
The insured can borrow against the policy, too.
The disability waiver of premium rider provides an extra layer of financial security for the insured so he or she can instead focus on recovery and overall quality of life.
Even if the policyholder ends up making a full recovery, premiums will still be taken care off by the insurer. In this case, the insurance company will not require any retroactive payment of premiums by the policyholder.
Criteria for a Disability Waiver of Premium Rider
An insured individual can purchase this provision on a life or disability insurance policy.
These factors can also vary with the type of life insurance the individual already has. It will typically run about 10 percent of the cost of the life insurance premium.
There is an age limitation on a disability waiver of premium rider, which is usually around 60 or 65 years of age.
It’s crucial to understand that the benefit will begin to pay after an initial waiting or elimination period is past.
This time frame can vary from 90 days to 6 months, depending on the policy in question. While a longer period means a smaller premium, the insured must be able to continue making payments, nonetheless.
To find the best deal for your budget, check out insurance offerings from different reputable providers. Or, if the disability waiver of premium rider isn’t the best fit for your situation, check out other comparable riders.
How the Insured Defines Disability
The insured must be working at the time of the disability to receive any sort of benefit.
As would be expected, insurance companies vary in their specific definitions of total disability. It then behooves the insured to understand the precise definition their insurance provider adheres to.
Generally, disabilities could range from loss of mobility in some capacity, such a losing a limb, to even sensory loss, such as hearing impairment. These disabilities could result from a sustained injury or stem from an illness.
On the flexible end of the scale, an insurer may define “own-occupation disability.” This definition applies to the current situation and the insured’s work role.
In simple terms, it means an injury or illness prevents the insured from performing the job he or she was trained to do.
This definition does provide some flexibility, though.
For example, an individual may lose the ability to work a construction job, but can easily obtain a job in the retail industry.
It is then possible for the individual to continue working and still receive the disability waiver of premium on his insurance plan.
However, the disability doesn’t have to be classified as a permanent total disability where the insured definitively loses their ability to work. The defined disability must simply impact the policyholder’s work performance in some genuine capacity.
How Disability Affects Premiums
When it comes to how disability definitions affect insurance premiums, the precise wording chosen is vital. This same scenario may not apply if it has an “any-occupation” or “modified own-occupation” disability definition.
Many insurance companies will state the trigger for the policy to kick in is the diagnosis of a total disability. Anything less than a total disability may mean the insurer will not waive the policyholder’s insurance premiums.
If the criteria are met, the insurance company will honor the claim.
The provision will continue to waive the life insurance premium as long as the disability persists, or until the term of the policy matures. If the disability happens to be a chronic condition, he or she will not have to go through an additional waiting period each time.
There could be a possibility of a waiting period or elimination period to confirm a disability, as well.
However, the insured will have to pay the premiums in the interim. This waiting period is standard among most insurance companies.
It’s worth noting how many insurance companies will include a periodic review of the insured’s disability status as part of the conditions of the disability waiver of premium rider.
Is the Disability Waiver of Premium Rider Right for Me?
Becoming disabled, whether unforeseen or not, can present both economic and emotional hardship for a family due to the loss of steady income.
The risk of a life insurance policy which could lapse only adds to these financial burdens.
Therefore, it’s essential to know the precise terms and conditions of a disability and any limitations or exclusions before purchasing this provision.
Depending on the insurance provider in question, your situation may end up not even qualifying under this rider.
A disability waiver of premium rider can ensure a policyholder will not lose insurance coverage while still receiving the benefits of a permanent life insurance policy.
If life insurance is essential for an individual managing a disability, a rider, such as the disability waiver of premium rider, would certainly prove a sound investment.
Since we can’t always foresee the future, considering a disability waiver of premium rider may be an ideal option for you and your family.
Whenever life takes an unexpected turn, it’s reassuring to know you and your loved ones are covered.