Waiver of Premium Rider in Term Insurance
When considering buying a life insurance policy, it is crucial to find a plan that fits your unique needs along with a sufficient sum assured. Life insurance policies also come with added benefits such as riders. Some riders that can be paired with these policies are Critical Illness, Permanent Total Disability, and the Waiver of Premium Rider. In this article, we will explore in detail the Waiver of Premium Rider's meaning, including its workings, benefits, features, purchasing process, exclusions, and the claim procedure.
What is a Waiver of Premium Rider?
The Waiver of Premium Rider is an extra feature that can be added to a life insurance policy. As suggested by its name, it waives off the future premium payments of the policyholder in cases of permanent total disability or critical illness. Once the policyholder suffers permanent total disability, the Waiver of Premium Rider comes into effect after 6 months. The rider guarantees that the life insurance coverage remains active even if the policyholder loses their income and cannot afford to pay premiums.
In traditional life insurance policies, individuals may find it difficult to make regular premium payments if they experience a critical illness or permanent total disability. Without the Waiver of Premium Rider, the policy could lapse in such cases, resulting in the loss of benefits. However, with a WOP rider, the life insurance policy remains intact with all the benefits.
How does the Waiver of Premium Rider work?
The Waiver of Premium Rider is bought along with the life insurance policy at a very nominal cost, depending on your age. For example: if you are 25 years old and have purchased a life insurance policy with a sum assured of ₹1 crore against annual premiums of ₹15,000, you can add the Waiver of Premium Rider for a very nominal cost of approximately ₹50-60 per month, which is equivalent to ₹600-700 annually. It is important to note that the Waiver of Premium Rider cannot be bought in the middle of a life insurance policy term.
After adding the WOP rider to your policy, if you are diagnosed with a critical illness or a permanent total disability, you can intimate the insurance provider about the same.
Once the insurance company approves the claim and verifies the permanent disability (after 6 months), the Waiver of Premium Rider comes into effect. The insurance company will waive the premium payments that the policyholder would normally be required to make during the disability period. This means that the policy will remain in force, providing the coverage as promised, even though the policyholder is not able to pay the premiums. The premium waiver rider, once triggered, will typically continue as long as the base policy tenure and ends when the policyholder's base policy ends.
Waiver of Premium is among the many term insurance riders that come with a term insurance policy. These riders include the Accidental Death Benefit Rider, Critical Illness Rider, Accelerated Death Benefit Rider, Accidental Disability Benefit Rider, Income Benefit Rider, and Child Support Benefit Rider.
Understanding Waiver of Premium With an Example
The working of the Waiver of Premium Rider can be best understood through a simple scenario:
Let’s assume Mr. Sharma has purchased a life insurance policy with a Waiver of Premium Rider. After a few years of paying premiums regularly, Mr. Sharma unfortunately meets with an accident that results in his permanent disability, making it impossible for him to work and earn an income. As a consequence, Mr. Sharma finds it challenging to pay the future premiums of his life insurance policy.
Mr. Sharma can inform the insurance company about his disability, providing the necessary medical documentation and proof. At this point, the Waiver of Premium Rider comes into action after 6 months. During this 6-month period, the policyholder is required to pay premiums while the insurer assesses their condition. Once the insurance company verifies the claim and approves it, the Waiver of Premium benefit is triggered. As a result, Mr. Sharma is no longer required to pay the remaining premiums for the policy’s duration. Despite his disability, the life insurance coverage will continue to be in force, ensuring that his family is financially protected.
Eligibility Criteria
- The minimum age to buy a life policy with a WOP rider is 18 years, whereas the maximum age is 65 years.
- A medical test is mandatory in order to opt for WOP. Certain tests such as blood and urine tests, among others, as specified by the insurer, are required to ensure that the policyholder doesn’t have any undisclosed pre-existing illnesses.
Benefits and Features of Waiver of Premium Rider
The Waiver of Premium Rider comes with a host of benefits and features that make it a valuable addition to a life insurance policy. Some of the key advantages include:
- Financial Protection during Disability or Critical Illness The primary benefit of the Waiver of Premium Rider is that it provides financial protection to the policyholder and their family during times of disability or critical illness. It ensures that the life insurance coverage continues, even if the policyholder is unable to pay the premiums due to their health condition.
- Safeguarding Policy against Lapse In the absence of the Waiver of Premium Rider, if a policyholder fails to pay the premium within the grace period, the policy may lapse, resulting in the loss of all benefits and premiums paid till that point. The WOP rider prevents this from happening by ensuring that the policy remains active despite non-payment of premiums during the waiver period.
- No Impact on Policy Benefits The Waiver of Premium Rider does not affect the primary benefits of the life insurance policy, and the death benefit remains unchanged.
- Affordable Addition Adding the Waiver of Premium Rider to a life insurance policy is relatively affordable and depends on your age.
- Tax Benefits Life insurance policies also come with tax benefits under Section 80C. The premiums paid for life insurance policies, including the base policy and any riders, are eligible for a deduction under Section 80C of the Income Tax Act.
How To Buy the Waiver of Premium Rider
When purchasing a life insurance policy, the Waiver of Premium Rider can be availed at an additional premium cost. Here’s how one can buy the rider:
- Consult with an Insurance Advisor The first step is to consult with an experienced insurance advisor who can guide you through the various options available and help you choose a life insurance policy that aligns with your needs. The advisor will also explain the different riders, including the Waiver of Premium Rider, and their benefits.
- Choose the Appropriate Coverage Determine the coverage amount and policy term that best suits your financial goals and requirements. Consider factors such as your family’s needs, outstanding liabilities, and future expenses while selecting the coverage.
- Understand the Rider Terms Thoroughly read and understand the terms and conditions of the Waiver of Premium Rider offered by the insurance company. Ensure that you are aware of the specific situations and illnesses covered under the rider.
- Pay the Additional Premium If you decide to opt for the Waiver of Premium Rider, you will need to pay an an additional premium over and above the base policy premium. The amount of the additional premium may vary depending on factors such as the policyholder’s age, sum assured, and the duration of the policy.
- Complete the Necessary Documentation Fill out the required forms and provide any necessary documents as requested by the insurance company. This may include details about your health and medical history, as well as any additional information needed to process the rider.
Exclusions of Waiver of Premium Rider
While the Waiver of Premium Rider offers substantial protection, it is essential to be aware of its exclusions. Here are some typical exclusions of the Waiver of Premium Rider:
- Pre-existing Disabilities or Illnesses The Waiver of Premium Rider typically does not cover disabilities or illnesses that existed before the policy was purchased. Only disabilities or illnesses that occur after the commencement of the policy are considered for the rider benefit.
- Diabetic Patients Policyholders who suffer from diabetes cannot avail of the Waiver of Premium Rider in any case.
- Self-inflicted Injuries Disabilities or illnesses resulting from self-inflicted injuries or intentional actions are generally not covered under the Waiver of Premium Rider.
- Breach of Law Permanent disabilities due to accidents caused by avoidance of laws will not be included. For example: If you were not wearing a helmet and met with an accident while riding a two-wheeler that caused permanent disability, your claim under WOP won’t be accepted.
Things To Know Before Raising a Claim Under WOP
The following are some of the things to consider while raising a claim under WOP:
- Waiting Period You cannot opt for a claim before completing the initial waiting period, generally 90 days from the date of commencement. Even if you raise a claim, it will automatically get rejected.
- Survival Period It is necessary to complete a survival period of 1 month from the date of detection of critical illness or permanent disability to activate the claim.
- Premiums For Permanent Disability The policyholder must pay premiums for at least 6 months following the disability. This duration allows life insurance companies to assess the policyholder's condition and confirm permanent total disability.
Claim Process for Waiver of Premium Rider
In the unfortunate event that a policyholder becomes disabled or critically ill and wishes to avail the benefits of the Waiver of Premium Rider, they must follow the claim process outlined by the insurance company. The process may involve the following steps:
- Inform the Insurance Company The policyholder or their nominee must notify the insurance company about the disability or critical illness, providing all necessary details and documentation. This step is crucial as it initiates the claim process.
- Medical Documentation The insurance company may require the policyholder to submit relevant medical reports, certificates, and other supporting documents that verify the disability or critical illness.
- Assessment and Verification The insurance company will assess the claim based on the provided documentation and verify whether it meets the conditions specified in the policy. This process may take some time, depending on the complexity of the case.
- Approval and Waiver of Premium If the claim is approved, the insurance company will activate the Waiver of Premium benefit. The policyholder will no longer be required to pay future premiums after the initial 6-month assessment period following disability or critical illness identification. The policy will continue to be in force, and the coverage will remain active.
Conclusion
The Waiver of Premium Rider is an invaluable addition to life insurance policies. It provides an added layer of security by safeguarding the policyholder and their family against unforeseen financial burdens during times of disability or critical illness. By waiving off future premium payments, the rider ensures that the life insurance coverage remains intact, allowing the policyholder to focus on their recovery and well-being.
Before purchasing any life insurance policy with the Waiver of Premium Rider, it is essential to thoroughly understand the terms and conditions offered by the insurance provider. Different policies may have varying eligibility criteria, inclusions, exclusions, and claim processes. Consulting with an experienced insurance advisor and reading the policy document carefully will enable individuals to make informed decisions about their insurance coverage.
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