Waiver of Premium is an additional insurance for the protection of the risk of failing to pay your monthly premium itself and usually means that the policy premium will be paid for by the insurance company for after a pre-agreed deferment period if you are unable to work either due to serious injury or critical illness. Other stipulations may apply, such as meeting specific health and age requirements.
It is therefore a benefit that can be added to protection insurance policies, like life insurance, income protection and critical illness cover.
As a type of add-on cover, also called a ‘rider’ benefit, waiver of premium is not a free benefit. When the benefit is available, the policyholder can opt in or out as it entails an additional amount, though marginal, on your monthly premium. The additional premium is basically the cost of ensuring the premium such that the insurer can pay your monthly premiums for you if you can’t work because you’ve become incapacitated.
Most waiver of premium riders contain a waiting period during which you cannot claim of benefits. The waiting/deferment period is a fixed period you decide on that has to pass before your insurance will kick in. During this period, you might rely on savings, company sick pay or any other means and so won’t need the benefit straight away. The longer the deferment period the cheaper the waiver of premium benefit.
Waiver of premium riders may contain several restrictions such as you may not have any pre-existing conditions or physical impairments. You may also face health and age restrictions.
A waiver of premium rider’s cost will depend on several factors, including your age, health and amount of coverage.
Why Waiver of Premium is important?
An insurance policy like a life cover is a contract wherein the policyholder’s responsibility is keep up to date with premium payments and the insurer’s is to settle qualifying claims as the arise. It’s important that you keep up with the monthly payments. Typically, if you don’t pay the premiums, your policy will be lapsed/cancelled. The cancellation would happen no matter how many years of payments you’ve made, meaning your family won’t be able to make a claim if you die.
Needless to say, premiums must be kept up to date even if you lose income due to incapacitation. That’s where a waiver of premium comes in, the insurer waives your premium or pays the premium for you for a pre-agreed period. As an incapacitated policyholder, you basically make a claim for insurer to pay your premiums and protect your policy instead of losing the policy due non-payment of premiums.
The waiver of premiums allows the redirection of limited personal funds to palliative care, personal finances, and living expenses. However, the most significant benefit is the continued protection of the insurance policy.
Waiver of Premium Claiming
Requirements for filing a claim vary, but they typically include a physician’s statement confirming the physical impairment or disability.
How will the insurer decide if you are unfit to work?
This depends on the level of cover you have, which will reflect how the incapacity to work is defined in your policy. Typically, the benefit will be set up on either:
- An ‘own occupation’ basis: This means you can trigger the benefit if you’re unable to do your usual job.
- A ‘suited occupation’ basis: It can only be activated if you can’t perform your own job or a similar one.
- An ‘any occupation’ basis: Your premiums will only be waived if it’s judged that you’re unable to do any job.
Some insurers might evaluate your ability to work by assessing whether you’re able to perform certain everyday tasks, such as walking, bending, lifting, climbing stairs and writing.
How long will a waiver of premium benefit last?
Once activated, you’re usually able to continue waiving your premiums until one of the following events occur:
- You’re healthy enough to return to work.
- Your condition changes so that you no longer meet the incapacity criteria set by your policy.
- Your life insurance, critical illness or income protection policy ends.
- You reach a certain age, often 60 or 65.
Multiple claims are also allowed during the term of the policy.
Does Diaspora Insurance Offer Waiver Of Premium on Diaspora Funeral Cash Plan?
Currently, the Waiver of Premium rider is not available on Diaspora Funeral Cash Plan. The main reason being that the embedded benefits of Diaspora Funeral Cash Plan are structured to simply benefits access as a no medicals and guaranteed acceptance policy that is a worldwide protection without borders. The simplicity with which clients are onboarded and put on risk on Diaspora Funeral Cash Plan would not be possible if a Waiver of Premium add-on benefit is included as it will mean having capacity to get impairment medical reports from numerous countries where Diaspora Funeral Cash Plan policyholders live.
Adding benefits like Waiver of Premium will also make Diaspora Funeral Cash Plan less flexible and transferrable which defeats the transnationality nature of the cover.
Key Take Aways:
- A waiver of premium rider is an optional insurance policy clause that waives insurance premium payments if the policyholder becomes critically ill or physically impaired.
- To buy a waiver of premium rider, you may need to meet certain age and health requirements.
- Physical impairment, critical illness, and severe injury are the most common qualifying conditions under the waiver of premium rider.
- The rider is added to an insurance policy for an additional fee.
- Normally, you can’t get a waiver of premium rider if you’re physically impaired or have a pre-existing condition.
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