What Is Life Insurance Waiver Of Premium Benefit?
Did you know that you can insure your life insurance policy premiums?
A Waiver of Premium benefit insures your life insurance premiums for a fixed period. Most insurance firms won’t include this as standard, but if you ask, the majority of firms will include it.
What it does
In the event you can’t work, or you choose to become a house person, or you’re off work sick, should you have taken out a policy with a Waiver of Premium Benefit, your insurance premiums won’t need made for the length of time you agreed with the insurance company when you took the policy out.
The only time you can’t include a Waiver of Premium is if you’re unemployed when your life insurance policy begins. In the case of joint life insurance policies, one person named on the policy must be in employment.
Choosing the Deferred Period
When you apply for a life insurance policy with a Waiver of Premium benefit added on to your policy, you need to choose the deferred period. This is the length of time that you’ll need to continue paying your own premiums before you can apply to your insurer to make a claim against your policy for them to begin paying your monthly premium.
The standard deferred terms are:
- One month
- Three months
- Six months
Whatever term you choose, you will need to continue to pay your premiums until the deferred period ends. You’ll also need to get in contact with your insurance provider to claim against the Waiver of Premium benefit.
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When can you generally make a claim?
Anytime you become unemployed, choose not to work such as taking a career break, or you become ill to the extent that your illness prevents you from working.
How long will the premiums continue to be paid for?
Your premiums can be paid for:
- The remainder of your term policy
- When you return to work
The premiums will stop being paid when your term life cover ends. Should you need to renew your life insurance cover, you will need to be in employment to renew your policy with a Waiver of Premium benefit added on to it.
You need to notify your insurer when you return to work, at which point you’ll need to restart making your own payments to your policy.
The difference between adding a Waiver of Premium benefit to your policy and adding a level of Income Protection Cover or a Critical Illness Plan
When you buy a life insurance policy, you’ll have a few options presented to you as additional benefits you can add to your purchase. None of these are mandatory. They are designed to supplement your policy. These will be separate policies, so should you have Income Protection, you’ll be able to make a claim on that cover without it affecting your life insurance policy. They are separate policies, the same with a Critical Illness Plan.
An Income Protection policy will pay you a sum of money if you’re unable to work or become unemployed. Critical illness cover will only pay when the policy holder is diagnosed with a critical illness that is included in the policy. Not all illnesses are considered critical. If it’s a terminal illness, you’ll often find it’s included in the terms of your policy.
With Critical Illness Cover there will be a lump sum pay out when you make a claim. Because there’s an agreed sum of money insured on the plan you select to add, there will be a higher premium.
With a Waiver of Premium, there is no lump sum payout. Your life insurance policy premiums (the monthly fee that you need to pay to your insurance provider) are the only element of your policy that’s affected. When you make a claim to have your premiums paid, your life insurance policy remains unaffected.
You will still be insured for the remainder of the term left for the policy to run. You just don’t get any payouts from your insurer, whereas with Income Protection, you could claim for a loss of income should you become unemployed, although that’s going to be based on you losing your job, rather than choosing to become a house person.
Should you be looking for the most affordable plan but perhaps not 100% certain about your job security, you can ask an insurance provider to add on a Waiver of Premium Benefit, so that if you do become unemployed, you can have your monthly premiums paid.
Think of a Waiver of Premiums as insurance for your insurance premiums.