MoneyLife

What is a Waiver of Premium Rider?

By Marc Guberti
What is a waiver of premium rider

A waiver of premium rider provides policyholders with an extra layer of protection. This clause waives premium payments and comes into effect if the policyholder becomes critically ill, seriously injured, or disabled. 

Policyholders work hard to cover their premiums each month. If a significant event hurts your ability to make those payments, the waiver of premium rider will come in handy.

How does a waiver of premium rider work?

A waiver of premium rider protects your financial safety net. If you can’t pay premiums, an insurer can void your policy. If that happens, all of the hard work you’ve put into paying your premiums will have been wasted. 

It’s one of the more brutal truths about how life insurance works. Luckily, a waiver of premium rider can keep you safe from this scenario if a significant condition or life event hurts your ability to make premium payments.

Is a waiver of premium rider worth it? 

A waiver of premium rider lasts for the duration of your entire policy. It typically adds $10 to $50 per month to your premiums. The waiver of premium rider does not apply if you are healthy and have fallen into hard financial times. 

While it’s helpful for some policyholders, it’s not worth the risk for everyone. If the extra $10 to $50 monthly payment will negatively impact your ability to pay your premiums, then the waiver of premium rider is not worth it for you.

When can a waiver of premium rider be added to a life insurance policy?

The waiver of premium rider is only available at issue. That means you can’t add the rider to your life insurance policy if you already started paying premiums. 

Not everyone can qualify for a waiver of premium rider. Policyholders must meet certain health and age requirements while also not having any pre-existing conditions or disabilities.

Who can qualify for a waiver of premium rider?

Not all disabled policyholders can qualify for a waiver of premium rider. Your disability must fall under the insurance company’s definition of a disability laid out in the contract. 

You must also be younger than the maximum age of the waiver of premium rider. Insurance companies decide which injuries can be covered and which ones won’t be, so make sure you review the clause carefully before agreeing to pay any extra premiums.

What is the waiting period on a waiver of premium rider in life insurance policies?

While the waiting period varies by company and policy, most insurance companies will place you in a six-month waiting period on a waiver of premium rider. If you are struggling to make premium payments during the waiting period, apply for MoneyLion’s Credit Builder Loan.

The Credit Builder program with MoneyLion can assist you in paying off your premiums. The Credit Builder loan will give you access to Instacash, which can provide you with up to $250 in cash advances that have a 0% APR.

What is the difference between waiver of premium and total permanent disability benefits?

Total permanent disability benefits occur when a policyholder suffers a lifelong disability that restricts their ability to work. These policyholders can no longer work as a result of their injuries. 

The coverage provided by total permanent disability benefits is usually a percentage of the policyholder’s working wage. If a policyholder retires for any reason other than as a result of their injuries, the insurer can choose to stop providing coverage.

On the other hand, a waiver of premium rider allows a policyholder to skip premium payments for the time being. However, it does not pay out any coverage that is equal to a fixed percentage of your wage like total permanent disability benefits do. 

Waiver of premium rider example

Imagine that a hard worker gets laid off due to hard times. The sudden lack of income will make it difficult for the policyholder to cover their expenses, including their monthly premiums. This situation will force the policyholder to make tough financial choices.

Some waiver of premium riders include unemployment, in which case a policyholder can temporarily skip their premium payments. Skipping these payments during a challenging time can help policyholders get back on their feet and continue making premium payments in the future.

Should I add a waiver of premium rider to my policy? 

It’s normal to ask yourself, “What is a waiver of premium rider?” and if it’s suitable for your policy. Each policyholder must consider several factors before deciding if a waiver of premium rider makes sense for them or their situation. 

Life is filled with uncertainties

A waiver of premium rider makes it easy to address some of life’s uncertainties should they arise. Unexpected life events, like injuries or unemployment, can negatively impact your ability to pay your premiums. If you miss any of your premium payments, your policy could become void, so the waiver of premium rider can help you mitigate associated risks.

Your premiums will increase

A waiver of premium rider increases the risks of the insurers. To compensate for the added risks, insurers will charge higher premiums. If you end up using the waiver of premium rider, the higher premiums are worth it. 

However, if you don’t use the waiver of premium rider, you will have paid the extra premiums for no reason. Think about whether or not you can afford the heightened premiums before you agree to a waiver of premium rider. 

You only get one chance 

The only time you can add a waiver of premium rider to your policy is at the very beginning of your policy’s life. You can’t change your mind and decide to add it later on down the road.  

If you feel uncomfortable taking that risk with your policy right out of the gate, speak with a financial advisor to better understand the best decision for you. Consider discussing your options with someone who can advise you on the choice that is in your best interest. 

Advantages of a waiver of premium rider 

If you work a high-risk job where you’re more likely to get injured, a waiver of premium rider can act as a financial safety net for you. Becoming disabled can be stressful enough, but a waiver of premium rider ensures that you won’t have to stress about covering your premiums in addition to adjusting to your new way of living.

Disadvantages of a waiver of premium rider

You can only buy the waiver of premium rider when you apply for your policy. If you don’t buy it at the start of your policy but you end up wanting to add a waiver of premium rider later on, it will unfortunately be too late to change your mind. Furthermore, the waiver of premium riders will increase your monthly premium, so it’s not a decision to take lightly.

Investing for emergency 

Life insurance isn’t the only way that you can invest in yourself in case of an emergency. An investment portfolio will help you build a financial safety net to cover your other expenses. Even if you never lean into your investment portfolio for funds, your loved ones may need it in the future, so it’s still worthwhile. 

A MoneyLion investment account is easy to set up and useful for those of you who want to get on the path to wealth. You can withdraw your funds whenever you need them, too.

Build your financial safety net

A waiver of premium rider can help you build your financial safety net, but you can also take additional actions to strengthen your financial position. For example, MoneyLion’s Safety Net makes it possible to visualize all of your available funds from a single platform. 
MoneyLion comes with Instacash, which allows you to receive up to $1,000 in cash advances at 0% APR. This can help you cover unexpected expenses when they arise. Give your finances an extra layer of protection with MoneyLion’s Safety Net!

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