Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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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 life insurance premiums?

You guessed it; your life insurance company will cancel your life insurance 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?

Policyholders may decide to buy a premium waiver if they think they won’t be able to make payments if they are injured on the job. A waiver of premium rider is an optional insurance policy that waives insurance premium payments if the policyholder becomes critically ill.

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” or “waiver of premium rider” will come into play on a life, health or long term care insurance policy.

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

So it’s sort of like insurance for your insurance. That’s right. Healthy people pay extra money but will be in good shape in the event something throws them 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.

Policyholders can add this rider as an optional or supplemental benefit to their life insurance policy. It’s only available when a policy is issued. Insurance providers usually add the rider fee to the premium or charge an upfront fee. Note that this fee will increase life insurance coverage costs.

Most waivers of premium have a waiting period during which they can be no claim of benefits. If disabled or injured during the waiting period, the policyholder may get a full refund of paid premiums. Requirements for filing a claim typically include a physician’s statement and notice from the Social Security Administration confirming the disability. Once you’re no longer disabled and are able to work again, premiums or charges would no longer be waived.

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How does it work?

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)