Posts tagged as:

disability waiver of premium

Disability Waiver of Premium

by Glenn on November 10, 2007

Disability Waiver of Premium is another rider available on life insurance policies (for other common riders see Accidental Death Benefit).

Disability waiver or premium (WP) is intended to waive your premiums should you become disabled. More specifically this rider will pay your life insurance premiums after generally 90 days, should you become disabled per the definition of disabled in the life insurance policy.

Now that initially sounds like a good idea. You become disabled, you still have your life insurance. And in fact the idea that you want to keep your life insurance should you become disabled IS a good idea. But this rider isn’t the way to pay for it.

Rather than buying disability insurance piecemeal on every little debt, a wise person should have proper disability insurance to protect a percentage of their entire income. For example, should you become disabled a good disability policy might pay 2/3’s of your regular income. That income can then be used to pay for your insurance policy as you would normally. And pay your mortgage. And make the car payments. And maybe buy some groceries. In other words, a proper disability plan should allow you to continue to meet your obligations and not just a small subset of your obligations.

Waiver of premium riders on life insurance policies, while they do work, are a bandaid solution to potential disability. Proper disability coverage should be taken out to cover your income, not just a small portion of your monthly outlay.

In short, like the accidental death benefit rider, disability waiver of premium rider is another option that I don’t normally recommend.

{ 1 comment }