What Is a Waiver of Premium Provision?

January 17, 2012 No Comments »


Insurance Q&A: “What is a waiver of premium provision?”

We purchase insurance with the idea that it’ll be there when we need it. But an obvious downside is that it doesn’t work if you don’t pay for it.

So what happens if you become ill or disabled and cannot work, and therefore cannot pay your premiums?

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You guessed it; your insurance company will cancel your policy. Can you blame them? McDonalds probably won’t give you a burger if you don’t pay for it, so why should insurance be any different?

Part of being a savvy insurance consumer is being educated on what types of coverage are available to ensure you do not suffer financial setbacks as a result of an unplanned event.

This is where the “waiver of premium provision” will come into play on a life, health or long term care insurance policy.

No Cost Insurance?

Not so fast. This is not a free insurance policy. The waiver of premium provision is a rider that can be attached to an existing policy for an additional cost, which may vary based on your age, risk level, policy type, and more.

The rider suspends your insurance premium payments in the event you become ill or disabled and cannot work (and pays premiums).

So it’s sort of like insurance for your insurance. That’s right. You pay extra money while you’re healthy, but will be in good shape in the event something throws you off track.

Not a bad idea. After all, the last thing you need if sick or disabled is a cancelled life, health or disability policy.

How It Works

What does the provision look like in action? Well, it’s not automatic.  You have to provide evidence to the insurer that you aren’t physically able to work.

This is almost always accomplished by consulting a physician who can verify that you are in fact disabled or too ill to make ends meet.

Evidence that the “event” took place during the specified policy period is also a requirement. Proving this is the doctor’s duty as well.

After the facts are established, insurers may demand a 90-day waiting period before they actually waive premium payments.

Keep in mind that this rider is not designed to stop premium payments for minor events. If you’re not “out of the game” for at least 90 days, expect your insurance bills to keep coming.

The good news is the waiver is usually retroactive, meaning once the timeline requirements are met (90 days pass), you can expect to receive the money you paid during the waiting period.

Read more: Why you need health insurance.

(photo: Gruenemann)

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