Waiver of Premium Explained

Covering Your Monthly Life Insurance Premiums

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By Grace Hickman
Updated on Monday 28 September 2020

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If you are unable to pay your monthly life insurance premiums then you could be at risk of your policy being voided – which would mean your family would be unable to claim if you were to pass away.

As a way of avoiding this outcome, life insurance companies offer a form of cover for your premiums called a ‘waiver of premium’.

What is a waiver of premium?

A waiver of premium is an add-on you can get for your life insurance which effectively acts as a form of insurance covering your ability to pay your premiums. It allows you to miss monthly payments while maintaining your level of cover if you are unable to work due to illness or injury.

Waiver of premiums are most common as a 'rider' on life insurance policies, but many insurance companies also offer them on health insurance and critical illness policies.

How do I get a waiver of premium on my life insurance policy?

To get a waiver of premium benefit applied to your policy you have to select it when you buy the policy, as you cannot add it as a ‘bolt-on’ once the policy has started.

A waiver of premium will also come with slightly higher premiums, which tend to be a few extra pounds per month depending on the insurer and the level of cover/length of policy term you choose.

The terms and conditions of your policy will specify the criteria required to activate the waiver of premium if you need it. The exact criteria will vary from policy to policy, but typically most insurers will only allow the waiver benefit to be activated if you are incapacitated and unable to work due to a critical illness or severe injury.

If you qualify for the benefit then the waiver won’t be applied immediately – you typically need to be off work for between three to nine months before the waiver starts to take over your premium payments. During that time you will be expected to continue paying your premiums or risk your life insurance policy being cancelled.

It’s also important to be aware that your waiver of premium benefit will have an expiration date, which is usually set to when the policyholder reaches a certain age – typically 55, 60 or 65.

What levels of cover are available with a waiver of premium?

Similar to an income protection policy, a waiver of premium typically comes with three different levels of cover which determine when you are eligible to make a claim and receive the benefit.

Most waivers of premium are activated if you are judged to be unable to work, but some will allow you to waive your premiums if you cannot work in your actual occupation, while for others, you only qualify if you are completely unable to do any form of work.

The three different levels of cover available are:

Own occupation

The waiver will apply if you are unable to carry on working in your own occupation. This tends to be the most expensive cover and is not offered by all insurers.

Suited occupation

With this, the waiver is applied if you can’t work in your own job or a similar role that suits your qualifications and experience.

Any occupation

With this type of waiver, you can only qualify for the benefit if you are unable to work in any role. These are the cheapest form of waiver as they can only be applied if you are injured or ill to such a degree that you are completely unable to work. These waivers often specify that the policyholder needs to be “totally and completely disabled” in order to qualify.

Do I need a waiver of premium if I have an income protection policy?

If you also have a valid income protection insurance policy in place then you probably already have similar cover in place so would not need a waiver of premium.

Income protection insurance provides cover if you are unable to work because of illness or injury, paying out a monthly benefit to cover your lost income. Therefore, you would be expected to continue to pay your life insurance premiums along with your other household bills and expenses.

Learn more about life insurance with our related guides:

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