insurance

Waiver of Premium

An insurance policy provision or rider that allows policyholders to stop paying premiums while maintaining full coverage if they become disabled or unable to work due to illness or injury. The insurance company continues the policy without premium payments during the qualifying period.

Example

“When John was diagnosed with cancer and couldn't work for two years, the waiver of premium rider on his life insurance policy kept his coverage active without him having to pay the monthly premiums.”

Memory Tip

Remember 'WOP' - When you're Out of work due to disability, your Premiums are waived.

Why It Matters

This protection ensures that people don't lose their insurance coverage during the times they need it most - when they're sick or injured and unable to earn income. Without this provision, many people would be forced to cancel their policies precisely when they're most vulnerable, potentially leaving their families without financial protection.

Common Misconception

People often think waiver of premium kicks in immediately when they become disabled, but there's typically a waiting period of 3-6 months before it takes effect. Some also believe it applies to any illness, when it usually requires total disability that prevents someone from working in their occupation or any occupation.

In Practice

Tom pays $200 monthly for a $500,000 life insurance policy with a waiver of premium rider. After a stroke leaves him unable to work as an accountant, he applies for the waiver after being disabled for six months. Once approved, his insurance company stops collecting the $200 monthly premiums while maintaining his full $500,000 coverage. If the waiver continues for 10 years, Tom will have received $24,000 in premium relief while keeping his life insurance protection intact.

Etymology

Combines 'waiver' from Old French 'weyver' meaning to abandon a claim, with 'premium' from Latin 'praemium' meaning reward or prize, referring to insurance payments.

Common Misspellings

waiver of premeumwavor of premiumwaver of premiumwaiver of primium

More in insurance

Other insurance terms you should know

deductibleThe amount you pay out-of-pocket before your insurance begin…insurance premiumThe amount paid periodically to an insurance company in exch…deductibleThe amount a policyholder must pay out of pocket before insu…copayA fixed amount paid by an insured person at the time of a me…coinsuranceA cost-sharing arrangement where the insured pays a percenta…out-of-pocket maximumThe most an insured person will pay for covered healthcare s…