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Waiver of Premium Rider in Life Insurance

TeamAckoDec 20, 2024

“The uncertainties of life cannot be foreseen but can be prepared for.” Life insurance creates financial security because the loved one is safe, regardless of whether the holder lives. Then again, if anything untimely happens, such as a critical illness or disabling accident, it becomes tough to keep the payment of premiums going. This is where the Waiver of Premium riders becomes invaluable to the policyholder. A Waiver of Premium rider allows maintaining coverage without adding Life Insurance premiums when they cannot afford them.

Waiver

Contents

What is the Waiver of Premium Rider?
- Simple Real-life Example of Using WOP Rider in Life Insurance:
How Does Waiver of Premium Rider in Life Insurance Work?
- ACKO Life Flexi Term Plan
Waiver of Premium Benefits in Life Insurance
How to Buy Waiver of Premium Rider in Life Insurance?
- Waiver of Premium Feature Built-In
- Optional Add-On Rider
Eligibility for Buying Waiver of Premium Rider
Choosing the Waiver of Premium Rider in Life Insurance
Factors Affecting Waiver of Premium Rider
Exclusions Under the Waiver of Premium Rider
Who Should Buy the Waiver of Premium Rider?
Wrapping It Up
Frequently Asked Questions

What is the Waiver of Premium Rider?

A Life Insurance Policy Waiver of Premium rider has the ability to become a life-saving add-on to Life Insurance coverage since it is aimed at securing policyholders in case things are not as expected to happen during their lifetime. For example, this rider may waive payments when the circumstances that cause the policyholder's inability to pay within the stipulated payment schedule arise. Under the rider, peace of mind is ensured, and coverage will stay even during the toughest times for policyholders.

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 ₹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 many 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:

ACKO Life Accidental Death Benefit Rider
ACKO Life Accidental Total Permanent Disability Benefit Rider
ACKO Life Critical Illness Benefit Rider

Waiver of Premium Benefits in 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 cannot work.

Protects 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?

When you add a Waiver of Premium (WOP) Rider to your life insurance, you typically have two choices. Both give you added peace of mind and financial security:

Waiver of Premium Feature Built-In

Some policies already include the Waiver of Premium Rider in the policy. This means that the rider will come free of charge. It can provide additional protection not requiring additional premiums for its coverage. In the qualifying conditions, if this is included in the policy, the rider automatically activates and includes continued coverage without premium payment.

Optional Add-On Rider

Policies that do not have the WOP feature by default may offer it to add the rider. An additional one-time fee, though, is charged for adding it. Remember that the rider would not cover premiums if the policyholder simply fails to pay due to financial hardship.

Adding a Waiver of Premium rider is a good way of ensuring that life insurance payouts are continued without jeopardising the validity of your policy, even when fortune is reversed due to unexpected events.

Eligibility for Buying Waiver of Premium Rider

You will have to meet the following basic criteria to become eligible for Waiver of Premium Rider:

Age: For this rider, you are eligible to apply only after attaining an age of 18 years and less than 65 years. The choice, however, depends from one insurer to the other.
Health: The illness and disability preceding the application for the rider are excluded by the insurance company. Apart from this, an individual's health, lifestyle, and occupation can be termed as other criteria for satisfying your eligibility for this rider.
Waiting Period: Once a rider is bought, there tends to be a waiting period of 6 to 12 months before the Waiver of Premium Rider benefits can be drawn, depending on the terms set by 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 choosing 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 are crucial 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 Life Insurance. State laws governing insurance practices and consumer protections can influence how insurers underwrite and price policies.

So, understand the factors discussed above before deciding to buy a Waiver of Premium rider.

Exclusions Under the Waiver of Premium Rider

A WOP rider can help ease some financial burdens with a premium payment by riding over this when special situations arise. Other exclusions may differ, however, from the insurer but generally apply to:

Suicide
Self-inflicted injuries
HIV/AIDS and related conditions
Injuries or conditions arising from alcohol or substance abuse
Congenital infections or diseases
Injuries from adventure sports or high-risk activities
Injuries resulting from hazardous professions
Pre-existing disabilities or medical conditions
Nuclear accidents involving radioactive contamination
Situations related to war, civil unrest, illegal activities, or involvement in violent acts

Who Should Buy the Waiver of Premium Rider?

People can buy 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, 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

What is a Waiver of Premium Rider, and how can it benefit the life insurance policy?

The Waiver of Premium Rider is an add-on rider that helps the policyholders stop paying premiums due to disability or critical illness while maintaining their life insurance policy without lapsing.

Is the maturity amount of life insurance taxable?

The maturity proceeds of a policy are tax-free under Section 10(10D) of the Income Tax Act, provided prescribed conditions are met. Still, it would be advisable to ask for details from your insurer regarding the taxability of maturity proceeds on your policy.

How does the Waiver of Premium Rider impact tax deductions on my life insurance?

The Waiver of Premium riders does not affect the tax deductions available under Sections 80C or 10(10D). However, premiums paid for the base life insurance policy (not the rider) may qualify for tax deductions under Section 80C.

What is the tax benefit of term life insurance with a Waiver of Premium Rider?

Term life insurance policies are eligible for tax deductions under Section 80C, and the death benefits are usually tax-free under Section 10(10D) if all requirements are satisfied.

Does adding the Waiver of Premium riders change the premium tax rate?

No, the Waiver of Premium Rider does not affect the premium tax rate. This rider does not have any bearing on the tax deduction on premiums in life insurance under Section 80C.

How Do I Select the Best Waiver of Premium Rider for My Policy?

To select the best waiver for Premium Rider, first try to judge the coverage limits, exclusions, claim process, and your specific requirements. Further, check if you get tax benefits on your life insurance policy under sections 80C and 10(10D).

What is the position regarding the taxability of Term Insurance benefits with this rider?

Section 10(10D) still provides tax-free term insurance benefits with the premium rider waiver. The rider does not affect the death benefit's tax-exempt status.

Am I eligible for tax benefits on Term Insurance?

Yes, the Term Insurance premiums are eligible under Section 80C of the Income Tax Act, and within Section 10(10D) of the Income Tax Act, the death benefit arising out of the plan is fully tax-free. Thus, the tax benefits of Term Insurance are important.

How much time is required as a waiting period for Waiver of Premium Rider?

The waiting period for the Waiver of Premium Rider varies depending on the different insurance companies; in fact, it is six months to one year. Upon the end of that waiting period, the rider waives the premiums if the policy owner is hit by serious illness or disability.

What happens if I cancel my life insurance with a Premium Rider waiver waiver?

If you cancel your life insurance policy, the Waiver of Premium Rider is cancelled, so you will no longer receive waivers of premiums or tax benefits on that policy.

Will a Waiver of Premium Rider change anything about my life insurance policy—coverage, benefits?

No, this Waiver of Premium provision does not affect the sum assured or the amount paid to the nominee in case of death. The Waiver of Premium Rider simply ensures that premiums are waived in the event of disability or critical illness.

What is the Waiting Period for a Waiver of Premium Rider?

A waiver of premium rider in life insurance policies allows policyholders to forgo premium payments if they become disabled and cannot work. Typically, there is a waiting period of about six months after the onset of the disability before the waiver takes effect. During this period, you must continue paying premiums. Some insurers may reimburse the premiums paid during the waiting period if your claim is approved.

Which type of rider will waive the premium?

A Waiver of Premium Rider is an optional add-on to a life insurance policy that waives premium payments if the policyholder becomes disabled or critically ill and is unable to work. This ensures that the policy remains active without the financial burden of ongoing premiums during such times.

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.