What Is A Waiver Of Premium Provision?

What is a waiver of premium provision? There are many additional endorsements, or 'riders' that can be attached to a basic policy of term disability insurance, whether on a group basis that is sponsored by your employer or on an individual policy that you are considering purchasing.

This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. Webb explains, "There are many additional endorsements, or 'riders' that can be attached to a basic policy of term disability insurance, whether on a group basis that is sponsored by your employer or on an individual policy that you are considering purchasing. The combinations of these different riders can greatly affect the overall cost and the benefits available to you in the event that you should suffer a disabling illness or injury. One of these riders is called a waiver of premium."


"A 'waiver of premium' rider to your disability insurance policy means that after a specified period of time following the onset of a disability you will no longer have to pay premiums on the insurance policy. One typical such rider states that you will not have to pay premiums after the 90th day following the determination of disability.




Note that some policies will apply the waiver of premium to the waiting or elimination period (which is the period of time from the date of injury that you must be disabled before benefits are paid to you) and will refund any premium paid during that waiting period. What this means is that if you elect to have this provision, you will essentially not have to be out of pocket for premium payments during the time of disability. This can be a very important consideration depending on the amount of wage replacement you have selected, or that is made available to you."

"There are many options when deciding the scope of coverage you feel you may need to have in case of a disabling injury or illness," Webb points out. "Depending on the state of your financial resources, you may have elected to be covered by a basic plan from your employer that provides a relatively small amount of income replacement. If that is the case, you should assess whether an additional premium now may protect that income if you should need it by purchasing a waiver of premium rider. As is the case with other optional riders, a waiver of premium means that the insurance company is forgoing income during your period of disability. It offers this because it assumes that a sufficient number of people will purchase this rider will never have a disability."

"You should also look to see whether the waiver of premium rider applies not only during the disability but also for a period of time afterward," Webb advises. "In some cases, this means that the rider will waive premiums for a period of time after you return to work. If you are in a situation where the work that you return to is not at the same salary that you were earning at the time you became disabled, the extra money available to you because of the waiver of premium may also be very important for you and your family as you begin to adjust to your new employment."

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