Waiver of premium for disability is a provision in an insurance policy ensuring that the insurance company will not require the insured to pay premiums if they are seriously injured. Definitions of disability and policy specifics can vary among insurance companies and affect when and for how long the premiums are waived in case of a disability.
It is crucial to note that insurance companies may charge a higher premium to include this waiver in the policy.
Key Takeaways
- Waiver of Premium for Disability: This policy provision activates if the insured becomes unexpectedly disabled and cannot pay the policy’s premium.
- Additional Cost: Insurance companies may charge more for a policy with this waiver attached to it.
- Varied Definitions: The definition of “totally disabled” may vary between insurance companies and policies.
- Injury or Illness: Typically, illness or injury must occur and cause the disability. Generally, the insured is considered “totally disabled” if they can’t perform their job.
How a Waiver of Premium for Disability Works
Two types of insurance policies that commonly include a waiver of premium for disability are life insurance and disability insurance. The waiver can mean the difference between keeping the policy and giving it up if the insured becomes disabled, is unable to work, and loses their income.
This waiver is especially vital for disability insurance because, if required to pay premiums after becoming disabled, the insured would have no protection against the situation they were insuring against.
Usually, this waiver applies retroactively to the start of the disability. If the insured made premium payments while the waiver was in effect, those premiums would typically be refunded in full. Many insured individuals choose this rider for their policies because it allows the policy to continue normally in the event of a disability, covering elements like the death benefit, dividends, and cash values. Once the disability ends, the policy owner resumes premium payments.
Issues can arise if an insurance company denies a life or disability insurance claim based on non-payment of premiums when the insured assumed the waiver was in effect. Definitions of “totally disabled” and functional specifics may differ per contract and insurance policy. Experts advise consulting an attorney if a claim is denied based on non-payment or if the insurance company declares the decedent not disabled as defined in the policy.
Example of a Waiver of Premium Disability
Generally, a person is deemed totally disabled if they can’t perform duties for which they are qualified by education, training, or experience due to injury or illness.
For example, suppose Alex sells cars, an occupation demanding interactions with customers about buying vehicles. If an injury or illness prevents Alex from fulfilling these duties, they will typically be considered disabled. If Alex has a waiver of premium disability and is defined by the insurance company as “totally disabled,” they can utilize the waiver.
Related Terms: insurance rider, disability insurance, life insurance, premium waiver, total disability.
References
- Guardian Life. “What will determine if I’m considered disabled?”
