Can the Life Insurance Policy Include a Waiver of Premium?
Life insurance policies have evolved over the years to include riders that enhance the main policy. A rider is an additional provision attached to the policy that modifies the original contract. One such modification to a life insurance policy is a waiver of premium. Make sure you understand how a waiver of premium works before electing this option on your policy.
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Identification
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A waiver of premium is often referred to as a "disability waiver" or "disability waiver of premium." These waivers are generally found on all types of life insurance policies. The waiver has associated costs, which increases the premium you pay for the policy. No additional underwriting or health requirements are necessary to add the disability waiver to any life insurance policy.
Features
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The waiver of premium on your life insurance policy waives the premium if you become disabled. To prove disability, you must provide information from your doctor proving your disability. Disability waivers may last for 3 to 6 months, but some policies extend the disability waiver for as long as you are disabled. You must elect the disability waiver at the start of your policy contract; it cannot be added or removed later.
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Benefits
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If you become disabled, the life insurance company pays your premiums. You get to keep your life insurance contract. If it is a cash value policy, the company is essentially funding your policy's savings for you. Your life insurance company may put restrictions on the use of cash value while the company is paying the premiums for you under the waiver of premium rider.
Disadvantages
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A disadvantage to the waiver of premium is that you may never need it. If your policy is a cash value policy that will be paid up in full prior to age 100, as is the case with limited pay life insurance policies, then the charges for the waiver of premium simply add to the cost of the policy after the policy is paid for.
Considerations
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Consider how likely you are to need a premium waiver on your policy. If you plan to make premium payments for most of your life, then a disability waiver may be worth the extra cost. If you have a limited payment policy that will be paid in 10 years or less, the additional cost may not be worth it.
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