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Waiver of premium

What is a waiver of premium?

Alicia Hempsted
Written by  Alicia Hempsted
5 min read
Updated: 07 May 2024

If you are unable to work due to a serious illness or injury, this special rider you can add to your life insurance will waive your life insurance premiums until you're recovered. Learn how it all works in this guide.

What is a life insurance waiver of premium?

Waiver of premium is a type of benefit that you can add to a life insurance policy to help you with your premium payments if you’re unable to work. If a serious health problem prevents you from earning, a waiver of premium rider will temporarily pause your premiums so you don’t have to pay them.

A waiver of premium rider is also available as a benefit for income protection insurance.

How does a waiver of premium rider work?

To activate your waiver of premium, you’ll need to make a claim for it with your insurer using the contact information provided in your policy documents – some providers may also have an online claims process via their website or portal.

You will need to provide a certain amount of information to make your claim, which includes evidence of your illness or injury in the form of medical documentation. For your claim to be accepted, you will need to comply with your policy’s definition of ‘incapacitation’, which can vary depending on your provider.

How do I add a waiver of premium rider to my life insurance?

You can add a waiver of premium rider as well as other benefits like critical illness cover to your life insurance policy when you first apply for it. Adding a waiver of premium rider will make your life insurance more expensive, so consider the real value of this extra protection before adding it to your policy.

How do insurers assess incapacity?

There are three general definitions of incapacity that are used by most insurers to assess whether you qualify for a waiver of premiums. These are:

  • Own occupation: You are considered incapacitated if any injury or illness prevents you from being able to work in your specific occupation

  • Suited occupation: You are considered incapacitated if an injury or illness prevents you from being able to work in your specific occupation or in a similar occupation based on your skillsets and qualifications

  • Any occupation: You are considered incapacitated if an injury or illness prevents you from working entirely in any occupation, otherwise referred to as being totally and completely disabled.

Other definitions of incapacity that you might find in a life insurance policy may depend on your ability to carry out certain physical activities, such as climbing stairs, writing, or lifting. Because all of these definitions are so different, you should always read the terms of your life insurance policy to know which one applies to you.

Can I claim the waiver of premium as soon as I leave work?

No, it’s not typical for any life insurance policy to allow you to claim your waiver of premium as soon as you’re out of work. There will almost certainly be a waiting period you have to endure before you can make a claim.

A waiver of premium rider is intended to cover you in the case of serious, long-term health problems, so it’s normally a requirement for you to be off work for at least several months before you can claim the waiver. The length of time you need to be off work before you can qualify depends on your provider – some may ask for only a couple of months while others might require as long as nine months without working.

The typical waiting period you can expect, however, is between three to six months. You’ll find your policy’s waiting period in the terms of your policy documents.

How long does a premium waiver last?

Once the waiver of premium has been activated, the length of time you can claim it for will depend on your provider and policy. The most common practice among life insurance providers is that once you have successfully claimed the waiver of premium, your premiums will continue to be waived until you’ve recovered enough to return to work.

However, waiver of premium riders often have age limits. Most policies will have an upper age limit of around 60-70 to align with the typical retirement age. Once you’ve retired, you’ll no longer be able to claim a waiver of premium benefit.

What happens to my premiums after I’ve recovered?

When you’re well enough to return to work, your normal life insurance premiums will start up again. You won’t need to backpay anything, nor will your premiums be increased – unless you have a life insurance policy that is linked to inflation.

You can claim a waiver of premiums multiple times for the same life insurance policy, so if you are injured or fall ill again in the future, you can still make use of it.

Does claiming a waiver of premium affect my life insurance payout?

No, a waiver of premiums doesn’t affect your life insurance payout. Your benefit will stay the same, so you won’t be penalised if you need to have your premiums waived more than once during your policy’s term.

However, if you have a decreasing term life insurance policy, your benefit may continue to decrease even while your premiums are being waived. This is because your life insurance benefit decreases consistently each year to ensure it reaches zero on the term date that you set when you applied for the policy.

If, for whatever reason, your life insurance benefit no longer covers what you need it to, you may need to contact your insurance provider to increase your cover, which will affect the cost of your policy.

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