Premium waiver riders on insurance policies
Insurance policies give you peace of mind. But what if an unfortunate circumstance leaves you unable to pay insurance premiums? Here's what you can do.
Life is full of uncertainty. An accident or an illness can derail even your most well-conceived plans. So you may be content that you have bought sufficient insurance to ensure that your family has enough money to maintain the same standard of living. But what happens if you are injured and are incapable of earning a living? What happens to the insurance policy’s outstanding premiums?
At such a time, having your insurance premium waived is a boon. And yes this is possible through premium waiver riders on the insurance policies.
The premium waiver rider kicks in when you are incapable of paying the premium amount due to a physical disability or illness. It prevents the policy from lapsing. This is a very useful rider.
Normally such a clause is applicable after the policyholder has been in a disabled condition for 3-6 months. However, the period varies from insurer to insurer. At the time of disability or illness, the policyholder should be 55 years or younger to avail this benefit. The premiums are waived till the policyholder turns 65 or till the maturity of the policy, whichever comes first. Bear in mind that if the policyholder recovers and can start earning again, the benefit will stop.
What’s really convenient is that a policyholder can effectively add this rider at a later stage. The rider will increase the amount of premium you pay. The more riders you add, the higher the premium you will need to pay.
By allowing the policyholder and his nominees to enjoy the insurance cover even when he/she isn’t in a state to carry on with the premiums, they fulfil the key objective of an insurance policy – to provide financial cover.
This rider also ensures that in the event of policyholder’s death during the term of the policy, the policy does not lapse and remains in force even during the auto cover period. This is a 2-year period after the insured stops paying premiums during which full death cover continues. However, the insured should have already paid up at least two full years’ premiums. This is a huge advantage for children, who suddenly lose earning parents. In fact, this rider was primarily designed for child plans. This rider ensures that the future of the policyholders’ children remains secure in the event of a misfortune.
One other key feature of this rider is that the premium paid for this rider qualifies for tax deduction under section 80D of the Income Tax Act.
Some words of caution: Be sure you read the ‘Terms and Conditions’ carefully and understand the clauses involved. You absolutely must read the fine print. It is extremely important to understand what the insurance company means by ‘disability’. What constitutes serious illness or injury, when the premium waiver will start and other such conditions are defined by the insurance company and vary from insurer to insurer.
In today’s fast-paced world and with ever-rising costs, it makes a lot of sense to opt for a premium waiver rider. For a just a small additional sum, you can gain a lot more protection and surety in the event of misfortune.