Waiver of Premium for Payer Benefit

Waiver of Premium for Payer Benefit

What it is

A waiver of premium for payer benefit is a rider or clause in a life insurance policy that stops premium payments if the designated payor becomes disabled (or otherwise qualifies under the rider). It ensures the policy remains in force without the payor having to continue making payments during the qualifying event.

Key distinctions:
* Applicant — person who applies for the policy.
* Insured — the person whose life is covered.
* Owner — person who owns the policy.
* Payor — person designated to make premium payments (not always the insured).

How it works (simple example)

If a parent or grandparent pays premiums for a child’s life policy, a payor waiver would relieve that payor of premium obligations if they become disabled. The insurer may:
* Continue the policy as paid-up (no further premiums required), or
* Convert it to extended-term insurance depending on the policy type and cash value.

The owner can also designate a new payor or begin paying premiums themselves. The waiver is typically triggered by disability of the payor, not by the payor’s death.

Typical limits and exclusions

• Expiration: Many waivers end at a specified age (commonly around 60 or 65) or when the insured reaches a certain age (e.g., age 21 for child policies).
• Cause-of-death or activity exclusions: Some waivers exclude claims arising from hazardous occupations or risky hobbies.
• Underwriting limits: Insurers often underwrite the waiver separately; a life policy may be approved while the waiver is denied.

Cost and qualification

• Cost: The rider usually adds a relatively small additional premium.
• Qualification: Insurers may require health information and age limits for the payor. Riskier payors may be denied the rider during underwriting.
• Enhanced options: Some insurers offer expanded waivers that cover unemployment or temporary layoffs, subject to additional terms.

When to consider adding it

• When someone else (parent, grandparent, spouse) will be paying premiums on the insured’s policy.
• To protect beneficiaries from a policy lapse if the payor becomes disabled.
• If the insured’s financial plans rely on the policy remaining in force even if the payor can’t pay.

Practical tips

• Read the rider’s fine print to understand trigger conditions, duration, and exclusions.
• Ask whether the waiver is included or must be added as a rider at application.
• Confirm whether both payor and insured must submit health information for underwriting.
• Compare costs and any enhanced coverage options (e.g., unemployment protection).

A waiver of premium for payer benefit is a cost-effective safeguard when someone other than the insured pays premiums. Proper underwriting and clear rider language determine how much protection it actually provides.