Q

What is a waiver of premium rider?

A

If you become disabled and can no longer pay your life insurance premiums, a waiver of premium rider keeps your policy intact by withdrawing from the death benefit.

Riders can be added to your life insurance policy to create a robust safety net for your loved ones. The waiver of premium rider is one optional rider that protects your life insurance policy from lapsing if you become disabled and can no longer pay your policy’s premiums.

If you add a waiver of premium rider to your policy and cannot work, you won’t need to make your premium payments — they will instead be withdrawn from the death benefit. While the rider protects your policy from lapsing, it is often costly, difficult to qualify for, and reduces the payout your beneficiaries receive when you die.

A standalone disability insurance policy offers more secure financial protection if you become disabled and are unable to work because it replaces your income and doesn’t reduce the face value of your life insurance policy.

KEY TAKEAWAYS

  • Riders offer additional coverage to enhance your life insurance policy

  • A certified financial planner can help you determine which riders are worthwhile for your needs

  • If you become disabled, a waiver of premium rider uses the death benefit to cover the cost of your life insurance policy

  • A standalone disability insurance policy is a better option than a waiver of premium rider

What is a life insurance rider?

Riders are customizations to your life insurance policy that create more robust coverage and enhance your policy. Adding on a rider usually increases the cost of your premiums, but provides an additional benefit beyond basic life insurance coverage.

Some common life insurance riders include:

How the waiver of premium rider works

The waiver of premium rider is a type of accelerated benefit rider, which means that it offers life insurance benefits while you’re still alive. Also called a disability income rider, adding a waiver of premium rider allows you to forgo premium payments if you become disabled and cannot work for six months or more to ensure your policy doesn’t lapse.

Your premium payments are withdrawn from the death benefit so that you no longer have to worry about paying them or risk surrendering your life insurance policy. Once the disability ends and you can work again, you resume making your premium payments.

While most life insurance companies offer waiver of premium riders for disabilities, some also offer the rider for unemployment. Similar to a waiver of premium rider for a disability, a waiver of premium for unemployment enables you to keep your life insurance policy intact without making premium payments if you are out of work.

What is the waiting period for a waiver of premium rider?

The waiting period between an injury and when you receive benefits from the rider is called the elimination period.

How long you’ll have to wait between incurring a disability and receiving the rider benefits varies for each life insurance company. Some insurers have an elimination period as low as four weeks, while others have elimination periods as high as six months. The graph below shows the elimination period for the life insurance companies offered in the Policygenius marketplace.

LIFE INSURANCE COMPANYWAIVER OF PREMIUM RIDER ELIMINATION PERIOD
AIG6 months
Banner Life (William Penn in New York)6 months
BrighthouseN/A
Lincoln Financial4 months
Mutual of Omaha4 weeks for unemployment, 6 months for disability
Pacific Life6 months
Principal6 months
Protective6 months
Prudential6 months
SBLI6 months
Transamerica6 months

Methodology: Information based on policies offered by Policygenius as of January 2021.

How much does a waiver of premium rider cost?

The waiver of premium rider is a flat fee added to your premium payments and remains the same throughout your policy. Just like premium payments, the amount you pay for an additional rider is determined by your insurer, age, and health classification. When you go through the underwriting process, the cost of both the waiver of premium rider and your monthly coverage will be determined at the same time.

Qualifying for a waiver of premium rider

Qualifying for a waiver of premium rider is usually difficult. To do so, your disability must fall within the insurance company’s definition of disability and be under the maximum age limit.

Age limits on waiver of premium riders

Some insurers have age limitations on who can use the waiver of premium rider, while others are more flexible. The graph below shows the age limit set in place to utilize the rider for each life insurance company. An N/A denotation means the insurer does not have an age limitation in place.

LIFE INSURANCE COMPANYWAIVER OF PREMIUM RIDER AGE MAXIMUM
AIG65 years old
BrighthouseN/A
Banner Life (William Penn in New York)65 years old
Lincoln Financial65 years old
Mutual of OmahaN/A
Pacific Life65 years old
Principal65 years old
Protective60 years old
Prudential65 years old
SBLI65 years old
Transamerica60 years old

Methodology: Information based on policies offered by Policygenius as of January 2021.

Some applicants may not be eligible to add on a waiver of premium rider to their policy due to age.

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Definition of disability

A waiver of premium rider can only be applied to your life insurance policy if it falls within your life insurance company’s definition of a disability. To claim the full benefit of the waiver of premium rider, you must be totally disabled, unable to work any position, and currently seeking treatment from a physician.

The waiver of premium rider defines disability as any-occupation disability, which means that it can only be utilized if your disability prohibits you from performing any type of work and you are unable to bring in an income. The alternative, an own-occupation disability benefit, means that you are eligible for benefits if your disability does not prevent you from working completely, but only prohibits you from working in your current role.

Is a waiver of premium rider worth it?

According to Policygenius data, one in four people become disabled throughout their careers, making additional disability coverage an important extra precaution. The older you are, the higher the likelihood that you could develop a long-term disability that might affect your income.

The graph below shows the plausibility of a disability at each age.

Current ageLikelihood of a long-term disability before retirementAveration duration of a long-term disability
25-302.5 in 1026 months
31-403.3 in 1032 months
41-503.0 in 1042 months
51-602.3 in 1050 months
60+1.0 in 1054 months

Methodology: Information based on Policygenius data from 2021.

An unexpected disability that can prohibit you from working can occur at any time, and if you are unable to pay the premium payments, you will have to surrender your life insurance policy. Adding on a waiver of premium rider protects your policy if you suffer from a disability, but there is a far more effective way to protect your finances if you become disabled — disability insurance.

Disability insurance

While purchasing a waiver of premium rider can offer the additional benefit that your life insurance policy won’t lapse, purchasing the rider alone won’t offer enough overall security if you become disabled. This is because:

It is hard to qualify for

Because eligibility for the waiver of premium rider requires total disability, meaning you cannot work any job, it can be difficult to qualify for. If you become disabled and cannot work in your current role but could still work another job, you are not eligible to use the rider.

There is no income replacement

When a disability prevents you from working, you lose vital income. While the waiver of premium rider removes the stressor of an additional bill or losing your life insurance policy, it does not replace the income needed for food, rent, and bills.

It reduces the death benefit

To cover your premium payments, the waiver of premium withdraws from the death benefit, reducing the payout your beneficiaries receive and jeopardizing the long-term financial health of your loved ones.

A disability insurance policy is the best way to set up an additional security net in case you get a disability that prevents you from working. It replaces some of the lost income so that you don’t have to dip into your savings or deplete the death benefit from your life insurance policy.

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What other disability riders should you consider adding on to your life insurance policy?

If you still want disability coverage after purchasing a standalone disability insurance policy, you can add on other disability riders to your life insurance policy. A waiver of premium rider is just one of the supplemental coverage options to consider for your life insurance policy in case you become disabled at any point throughout your life. Some other options include:

  • Accelerated death benefit rider (ADB)An ADB rider pays out some of your death benefit while you are alive if you are diagnosed with a terminal illness. Sometimes referred to as a living benefit, the money can be used towards anything.

  • Disability income rider — Offered only by select insurance companies, a disability income rider provides you with a monthly stipend to replace your income if you cannot work due to a disability.

  • Critical illness rider — If you are diagnosed with a critical illness, a critical illness rider can pay out a lump sum that is subtracted from the death benefit to cover the cost of treatment.

Speaking to a certified financial planner is the best way to determine what insurance plans and riders are best suited for your needs without overpaying for coverage.

FAQ

Do I need a waiver of premium rider?

A waiver of premium rider protects your policy from lapsing if you can no longer pay the premiums, but it can also be costly, difficult to qualify for, and reduces your policy’s death benefit. Most people should instead purchase a standalone disability insurance policy.

What is the waiting period for a waiver of premium rider?

Most insurers typically require that you are disabled and cannot work for six months before activating the waiver of premium rider, however, the waiting period varies for each life insurance company.

What is the advantage of a waiver of premium provision in a life policy?

Adding a waiver of premium rider to your life insurance policy protects it from lapsing if you become disabled and can no longer work or pay your life insurance premiums.

Life Insurance Expert

Nupur Gambhir

Life Insurance Expert

Nupur Gambhir is a life insurance editor at Policygenius in New York City. She has researched and written extensively about life insurance since 2019, with specialties in life insurance companies, policy types, and end-of-life planning. Her writing on insurance and finance has appeared on MSN, The Financial Gym, and end-of-life planning service Cake. Previously, she worked in marketing and business development for travel and tech.

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