A waiver of premium is a rider which can be attached typically to a life insurance policy, which ensures that the policy will continue to be in effect even if the policyholder experiences a loss of income. These riders are mostly used in life insurance policies so that the policy will fully mature and be available to the survivors of the policyholder when he or she dies. They may also be rolled into disability insurance policies, and other types of policies such as personal pension plans.
Some insurance policies automatically include a waiver of premium clause, but in others, it will need to be added as an additional rider. An extra fee may also be charged to obtain it and if you view this option as important, talk to your financial broker about the options and associated terms and conditions. When someone has a waiver of premium rider, it means that he or she will be allowed to stop making payments on the policy in the event of loss of income. The loss may be temporary, as might be the case when someone is sick or permanent, in the case of a disability. In either case, the policy will continue to remain in effect even though the premiums are not being paid. There may be associated restrictions, such as age and physical condition caveats, which could void the waiver of premium clause. It is important to understand these restrictions and to be aware of the fact that most people must lose their income for at least six months to be eligible for the rider to kick in.
These riders allow policyholders to receive benefits even in the event of a catastrophe. In the case of life insurance, the waiver of premium benefits the survivors more than the policyholder, as he or she must die for the insurance to pay out. Disability insurance can be set up with a waiver of premium benefit to ensure that the policyholder will get benefits when he or she needs them. While a waiver of premium on a personal pension policy ensures the policyholder will receive full pension benefits at normal retirement age.