A disability waiver of premium rider keeps your life insurance policy active if you become disabled and can’t work. Your insurance company pays the premiums for you during your disability. This rider typically costs 10-20% extra on term policies and requires a waiting period of about six months before activation.
Paying the premiums keeps your life insurance coverage active. If you died with coverage in place, your family could claim your policy’s death benefit. The payout could help your family build a new life.
But what would happen if you became disabled and couldn’t work, making it impossible to afford your premiums?
You’d probably lose the life insurance coverage. Unless you’d opted for a disability waiver of premium rider when you bought the policy. This is one of many life insurance riders that can protect your coverage.
How a Disability Waiver of Premium Rider Works
A disability waiver of premium rider gives you a way to keep the policy in place, even when you can’t pay the premiums because you’re disabled.
The rider allows your insurer to pay the premiums for you, keeping your coverage active in case your family needs it.
When you recover and can work again, you can resume paying premiums without interrupting your coverage.
As with any life insurance rider, you’ll pay a higher premium to add this flexibility to a policy. How much more you’ll pay depends on several factors, which we’ll explore below.
The Value of Waiving the Premium
The value of a disability waiver of premium rider seems clear enough on the surface: you get to keep your coverage even if a disability prevents you from paying the premiums.
But is this flexibility worth the extra money? Couldn’t you simply let your insurance lapse and then buy another life insurance policy when you’re able to pay the premiums again?
Yes, you could. But life insurance costs more the older you get. If you bought a policy at age 35 and locked in a rate for a 35-year-old, getting a new policy at age 50 would require higher premiums.
A rider can keep your policy active while you’re disabled and can’t afford the premiums. Not only can you keep the same coverage at the same price, but you’ll also have the option to maintain protection when you need it most.
Requirements and Limitations
Naturally, your insurance company won’t take over your premium payments without good reason. When you have a disability waiver of premium rider, you’ll still have to meet some requirements before activating it.
Proving Your Disability
Your insurer will define what it considers a disability. To prove you’re disabled, some insurers may require documentation from the Social Security Administration or your physician. Be sure you know the rules before buying in.
Waiting Periods
Before you can activate the rider, your insurance company will require you to complete a waiting period of three to six months. Some companies call this an elimination period. The waiting period starts when you become disabled.
While you wait, you’ll have to continue paying your premiums. Typically, you have to complete a waiting period only once. If you recovered but became disabled a second time, you could then reactivate the rider without waiting.
Own Occupation vs. Any Occupation
Most companies make an important distinction when they define your disability:
- Own occupation: Your inability to work in your chosen field qualifies as a disability.
- Any occupation: You’d have to be unable to work any job to waive your premiums.
An own occupation rider usually costs more but provides broader protection.
Age Requirements
Typically, insurance companies stop offering waiver of premium policies when you reach age 60 or 65, depending on the insurer. These riders are designed to protect your coverage when you’re unable to work. Since 65 is the traditional retirement age, companies assume you’re no longer using your earnings to pay premiums.
These limitations vary among different insurance companies. You can find less strict requirements for disability waiver of premium riders, but these riders will ordinarily cost more.
What Does a Waiver of Premium Rider Cost?
Almost every life insurance company offers a disability waiver of premium rider. It’s one of the most popular of all life insurance policy riders.
You can get this type of rider on a term or a whole life policy:
With Term Life: Term is the simplest kind of coverage. Because term life insurance has an expiration date, its premiums typically cost less and offer more coverage. The disability waiver of premium rider will normally be added as a percentage of your premium, typically 10 to 20 percent for a term policy.
With Whole Life: Whole or permanent life insurance can last the rest of your life. Along with your permanent coverage, your premiums fund an additional cash value which you can use later in life. These extras make your premiums significantly more expensive compared to term life. The rider may add 3 to 5 percent extra to your whole life premiums.
Paying these extra percentage increases will add more to your regular premiums. But if you need the rider, you’ll be glad to have made the purchase.
Most insurers require you to purchase this rider when you first buy the policy. Some may allow adding it later, but this is less common. Sometimes you can pay the extra money for the rider up front as a lump sum.
Who Should Get a Waiver of Premium Rider?
Here’s the tricky thing about a disability waiver of premium rider: you can never know for sure whether you’ll need it.
If you know you’ll need the rider because you already have a pre-existing condition that could disable you, you will not qualify for the rider. Instead, you have to buy the rider in anticipation of the need.
Of all the riders available in the insurance marketplace, you could make a case for getting this one above most others because this rider can keep you insured even when you can’t afford the coverage.
Other Ways to Protect Against Disability
If you have another way to deal with a disability that prevents you from earning an income, you may not need a disability waiver of premium rider added to your coverage.
Concerns about disability have inspired these other products you may already have or may be interested in getting:
- Disability Income Rider: If you became disabled and couldn’t work, a disability income rider added to your life insurance policy could provide a monthly source of income. Ordinarily, you wouldn’t need both a disability waiver of premium and a disability income rider.
- Accelerated Death Benefit: A policyholder who developed a terminal or other kind of qualifying illness could activate an accelerated death benefit and receive a portion of the policy’s coverage prior to death. This added flexibility could help you pay medical bills that are threatening your family’s financial stability.
- Disability Insurance: Unlike riders, disability insurance is separate from life insurance. This kind of coverage can replace a significant portion of your income if you become disabled and can’t work. Your employer may offer a short-term disability insurance policy in your benefits package.
- Workers’ Compensation: If you were injured at work, your company’s Workers’ Compensation insurance should be available to help while you’re disabled.
Frequently Asked Questions
What is a disability waiver of premium rider?
A disability waiver of premium rider is an add-on to your life insurance policy that pays your premiums if you become disabled and can’t work. Your coverage stays active without you having to make payments during your disability.
How long do I have to be disabled before the waiver kicks in?
Most insurance companies require a waiting period of 3 to 6 months before the waiver activates. During this time, you’ll still need to pay your premiums. Once the waiting period ends, the insurer takes over payments.
Can I add a waiver of premium rider to an existing policy?
Most insurers require you to purchase the disability waiver of premium rider when you first buy your life insurance policy. Some companies may allow adding it later, but this is uncommon. Consider this option carefully when shopping for coverage.
What’s the difference between own occupation and any occupation disability?
With own occupation coverage, you qualify as disabled if you can’t perform your specific job. With any occupation coverage, you must be unable to work any job at all. Own occupation provides broader protection but costs more.
Is a waiver of premium rider worth the extra cost?
For most people, yes. The rider typically adds 10-20% to term life premiums but protects your coverage if disability strikes. Without it, you could lose your policy right when your family needs protection most.
Key Takeaways
- A disability waiver of premium rider keeps your life insurance active if you become disabled and can’t pay premiums.
- Most riders require a 3-6 month waiting period before activation.
- You typically must purchase this rider when buying your policy, not later.
- Own occupation coverage is more expensive but provides broader disability protection.
- The rider typically costs 10-20% extra on term policies and 3-5% on whole life.
Need help choosing the right life insurance with disability protection? Use the quoter on this page to compare rates, or call us at 800-712-8519 to speak with a licensed agent.
