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Waiver of Premium Rider in Life Insurance

TeamAckoMay 13, 2024

Life insurance is an essential financial instrument that provides your family with the necessary financial security in the event of your death. However, predicting the future is impossible, and unforeseen misfortunes such as accidents or critical illnesses can arise, leading to situations where paying life insurance premium becomes challenging. In such circumstances, a waiver of premium rider serves as a saviour.

Waiver

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Pros 

Cons

Flexibility in Difficult Times: Offers insurer with less financial obligation

Duration Limits: Can waive premium up to a certain age

Protection Against Policy Lapse: The plan can lapse if the premium is not paid

Long waiting period: Often takes up to 6 months

Tax Benefits: Avail tax benefit under section 80C

What is the Waiver of Premium Rider?

The waiver of premium rider is an additional feature that can be attached to a life insurance policy, providing the policyholder with the option to waive their premium payments in the event of certain circumstances that render them unable to pay. These circumstances may include:

  • Disability

  • Critical illness, or 

  • Death of the policyholder

The waiver of premium rider acts as a safety net for policyholders, ensuring that their life insurance coverage remains intact even if they are unable to pay premiums due to unforeseen circumstances. This means that the policy will continue in force without interruption, and the beneficiaries will receive the full death benefit amount in the event of the policyholder's demise.

Simple Real-life example of using WOP Rider in Life Insurance:

Rita, aged 35, has a life insurance policy and has purchased an additional feature: a Waiver of Premium Rider with a monthly premium of INR 2,000. Life is a bold journey, and an event that occurred in her life left her with a disability. 

During this challenging time, her Waiver of Premium Rider protects her from financial hardships. The rider waives off her premium payments while maintaining coverage. This ensures her peace of mind, allowing her to focus on recovery without worrying about the financial burden of insurance premiums.

Specific terms and conditions may apply, such as meeting certain age and health requirements to avail of the Waiver of Premium Rider. However, it is an excellent option to add to your life insurance if you are concerned about getting diagnosed with an illness or want to strengthen the coverage for your family. There are many other riders' life insurance offers. Learn about types of life insurance riders in India.

How Does Waiver of Premium Rider in Life Insurance Work?

When you purchase a life insurance policy with a Waiver of Premium Rider, you must pay an additional premium to avail of the rider's benefits. The terms and costs of this rider depend on the insurance company and the specific policy. 

  • If you become critically ill or disabled, you will be eligible for a waiver on the remaining premiums until your condition resolves. Suppose your condition improves, you recover from the disability or illness, and then again fall critically ill or become disabled. In that case, you can benefit from the Waiver of Premium Rider again. Moreover, all future payable premiums will be waived if you pass away or suffer an accidental total or permanent disability. This way, you can claim the waiver multiple times during your life insurance tenure.

  • Remember that you must notify your insurance company and submit a claim. The complete claim form typically requires evidence of illness, such as medical reports.

  • Once the claim for premium waiver is filed, there is usually a predetermined waiting period (often around six months, but this can vary among insurers). Remember that the rider only takes effect after passing a waiting period. It simply means that if you get physically disabled during the waiting period, you may receive a full refund for the paid premiums.

  • The waiver typically remains in effect if your condition persists up to a certain age within the coverage period (often age 60 or 65).  You must resume the premium payments if you recover before reaching that age. 

It is important to note that the WOP rider only takes care of your premiums if you meet the specific definition of disabled or critically ill mentioned in your policy. So, always understand the policy thoroughly before opting for the rider.

ACKO Life Flexi Term Plan

With the ACKO Life Flexi Term Plan, you can redefine your perspective on term insurance. This highly adaptable policy not only ensures a solid financial support system for your loved ones but also offers a multitude of benefits exclusively for you as the policyholder. 

Key advantages include:

Adaptable sum assured

Flexible Policy Tenure

Flexible Payout Options 

Will Creation Service

Affordable Premiums

Easy Claim Process

The claims can be initiated online with minimal paperwork. With a track record of swift payouts, you can trust that your loved ones will receive the financial support they need without undue hassle during an already difficult time.

You can also check out:

Benefits of adding Waiver of Premium Rider to Life Insurance

Buying the Waiver of Premium Rider to your life insurance plan has various benefits. Let’s understand some of the key benefits thoroughly. 

Offers financial security

Life insurance is a great way to get financial security for your loved ones. Adding a WOP rider ensures your policy continues if you get seriously ill or injured and are unable to work.

Provides protection against uncertainties

While life insurance offers protection to your family after your demise, getting a WOP rider will also protect you from the uncertainties of life. In case of accidents, permanent disability or critical illness diagnoses, all future payable premiums get waived.

Prevents policy lapse

The life insurance policy usually lapses if you cannot make payments due to an illness. However, adding the Waiver of Premium Rider will prevent your policy from lapsing.

Supports recurring illness or disability

One of the best things about a WOP rider is that it is not limited to one-time usage. If you fall critically ill or get injured after complete recovery from one event, you can use the WOP benefit again if you meet the requirements.

Provides tax benefits

Adding a WOP rider to your life insurance plan can help you get tax benefits under Section 80C of the Income Tax Act, 1961. The premium you pay towards the rider is also eligible for tax exemption under the old tax regime.

How to Buy Waiver of Premium Rider in Life Insurance?

Two options available to you when choosing a Waiver of Premium Rider.

  • Some life insurance plans come with the Waiver of Premiums function built-in, offering an excellent method of securing additional financial protection for you and your household. In this case, there is no additional cost to acquire this rider

  • In accordance with the provisions of the policy, you will need to choose the WOP add-on and pay a one-time cost. Purchasing this rider will guarantee that you receive life insurance payouts without compromising the validity of the coverage.

Eligibility for buying Waiver of Premium Rider

The eligibility criteria for getting a Waiver of Premium Rider include the following.

  • The minimum age limit to opt for a WOP rider is 18, and the maximum is 65.

  • The insurance company may not consider any pre-existing illness or disability. 

  • The insurer might consider your overall health, occupation and lifestyle.

  • The waiting period for WOP to come into force will be 6 to 12 months, depending upon the terms of the insurer.

Choosing the Waiver of Premium Rider in Life Insurance

When selecting a life insurance policy, opting for the Waiver of Premium Rider can provide valuable protection. Here's how to make the right choice:

  • Understanding the Rider: Firstly, grasp what the Waiver of Premium Rider entails. It's an additional feature that exempts you from paying premiums if you become disabled or unable to work due to illness or injury.

  • Assessing Personal Needs: Consider your circumstances. If you have dependents relying on your income, this rider can offer peace of mind by ensuring the policy remains active even if you face financial difficulties due to disability.

  • Evaluating Health and Lifestyle: Evaluate your health and lifestyle factors. If you work in a high-risk profession or have pre-existing health conditions, the Waiver of Premium Rider may be particularly beneficial.

  • Comparing Costs: Compare the costs associated with adding the rider to your policy. While it provides added protection, it also increases the premium. Ensure the benefits outweigh the extra expense.

  • Reviewing Policy Terms: Carefully review the terms and conditions of the rider. Understand the eligibility criteria for activating the waiver and any applicable limitations or exclusions.

  • Consulting with an Advisor: Finally, seek advice from a qualified insurance advisor. They can help you assess your needs and determine if the Waiver of Premium Rider aligns with your financial plan.

By following these steps, you can make an informed decision about whether to choose the Waiver of Premium Rider in your life insurance policy.

Factors Affecting Waiver of Premium Rider

Some of the factors you must consider before taking waiver of premium rider are: -

  • Age and Health Condition: Age and health play a crucial role in determining eligibility for the Premium Rider Waiver. Insurers assess the applicant's health status to gauge the risk of potential claims. Younger, healthier individuals typically qualify more easily and may enjoy lower premiums.

  • Occupation and Lifestyle: Certain occupations and lifestyles may increase the risk of disability or illness, affecting the rider's availability and cost. High-risk professions or hazardous hobbies might lead to higher premiums or even exclusions from coverage.

  • Insurance Provider Policies: Each insurance company sets underwriting guidelines for the Waiver of Premium Rider. Factors such as the company's risk appetite, financial stability, and market competitiveness can influence the availability and terms of the rider.

  • Policy Features and Options: The specific terms and conditions of the insurance policy also impact the Waiver of Premium Rider. Some policies may include the rider automatically, while others offer it as an optional add-on with varying coverage limits and durations.

  • State Regulations: Insurance regulations vary by state and may affect the availability and pricing of riders, such as the Waiver of Premium. State laws governing insurance practices and consumer protections can influence how insurers underwrite and price policies.

So, understand the factors discussed above before making a final decision to buy a waiver of premium rider.

Exclusions under the Waiver of Premium Rider

Exclusions in a WOP rider may vary from one insurance agency to another. However, here are some standard exclusions.

  • Suicide 

  • Self-harmed injuries

  • HIV/AIDS

  • Alcohol or substance abuse

  • Congenital infection/diseases

  • Injury due to adventure sports

  • Injury due to hazardous profession

  • Pre-existing disability or medical condition

  • A nuclear accident caused by radioactive contamination

  • War, breach of law, civil unrest or involvement in violent acts.

Who should buy the Waiver of Premium Rider?

The following people can consider buying the Waiver of Premium Rider with their life insurance policy.

  • Self-employed people with one source of income

A disability or critical illness may prevent you from working and might stop your income source. Suppose you are self-employed with just one income source. In that case, it is wise to consider getting a WOP rider to reduce the financial burden on your family in case of your disability or critical illness.

  • Sole earning member of the family

If you have a fixed source income or are the only earning member in the family, getting a WOP rider for your life insurance can be an excellent option. Your family will continue to get support from your life insurance plan if you are physically impaired or cannot work due to illness.

  • Individuals with high-risk jobs and hobbies

Some professions come with inherent risks. For example, working as firefighters, pilots, police officers, drivers, nurses, etc., can be risky. People with such jobs should consider adding a WOP rider to their insurance policy. Also, if you have hobbies that involve high risk, buying this rider can provide financial support in case of an accident.

  • Individuals with a family history of illness

If you have any existing health issues or risk falling sick based on your family health history, consider getting the WOP rider. It offers peace of mind knowing you and your family will be cared for if you end up with a similar illness or are disabled.

Wrapping It Up

A waiver of premium rider in life insurance is a valuable and useful add-on feature for life insurance policies, providing policyholders financial security and peace of mind. However, it is important to carefully assess the options available and choose a plan that best suits your needs and budget. With the ACKO Life Flexi Term Plan, you can enjoy the benefits of comprehensive life insurance coverage with the added safety net of a waiver for premium riders, all at an affordable cost. So, make sure to understand your options and choose wisely to secure a better future for your loved ones.

Frequently Asked Questions 

Below are some of the frequently asked questions on Waiver of Premium Rider in Life Insurance

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What is a waiver of premium rider?

It is an additional feature that offers benefits to a life insurance policy, allowing the policyholder to waive their premium payments in case of certain events such as disability or critical illness.

How can one choose the best waiver of premium rider for their life insurance policy?

To choose the best option, it is important to consider factors such as coverage, exclusions, claim process, and personal needs before making a decision.

What are the benefits of opting for the ACKO Life Flexi Term Plan?

One of the main benefits of this plan is that it includes a waiver of premium rider at no additional cost and also offers coverage for death due to accidents in addition to disability and critical illness.

How does the ACKO Life Flexi Term Plan application process differ from traditional life insurance policies?

The ACKO Life Flexi Term Plan application process is simple and hassle-free, with minimal paperwork. In contrast, traditional policies may require several medical check-ups and disclosure of health history.

Is getting a Waiver of Premium Rider worth it?

Getting a Waiver of Premium Rider ensures financial security to the policyholder and their family if they become critically ill or physically impaired. The future premiums get waived off until the policyholder recovers and protects the policy from getting lapsed. 

What is the waiting period for a WOP rider in Life Insurance?

The waiting period may vary based on the insurance agency's terms. However, it can be anywhere from six months to a year. The premium provision takes effect once the waiting period is over and lasts until the policyholder recovers from any critical illness or disability.

What happens if I cancel my Life Insurance policy with a Waiver of Premium Rider?

If you cancel your Life Insurance policy with a Waiver of Premium Rider, you will no longer be covered by the rider, and you will be responsible for paying your premium payments.

How do I know if the Waiver of Premium Rider is right for me? 

It's important to consider your circumstances and risk tolerance carefully when deciding whether to add this rider to your Life Insurance policy. Talking with a financial advisor or insurance professional can also help you make an informed decision.

How does the Waiver of Premium Rider affect my Life Insurance coverage?

This rider does not affect the death benefit or coverage amount of your Life Insurance policy. It only waives your premium payments in the event of a disability.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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