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Riders are a great way to customize your insurance policy and protect yourself against specific risks. One such optional benefit offered by most insurance companies, is the Waiver of Premium rider. As the very name suggests this rider, waives payment of future premiums for a specific term, subject to certain conditions. Here is a quick guide to help you understand what this rider actually entitles you to and when you should opt for one.
Waiver of Premium - The Basics
Accidents and unforeseen events may cause injuries or disablements, which could hamper your work and regular stream of income. At such times when it becomes difficult to maintain your policy, waiver of premium rider comes to your rescue. The rider entitles you to waiver of future premiums in the event of loss of income arising out of any disablement (sometimes even death), and prevents any policy lapse. The key features of this rider are as follows.
•Premiums would be paid by the insurance company, for as long as you remain disabled, or for a certain period of time, as per the terms and conditions of the policy.
•Ensures the policy is in effect even if you experience a loss of income due to death/disability.
•Ensures maturity benefits of policy will be available to your survivors, in case of death.
•The rider stays valid till the term of the base plan.
•Premiums paid under this rider are eligible for tax benefits under Section 80C.
When Does a Waiver of Premium Make Sense?
The Waiver of Premium rider is an additional protection for you and your family available at an extra cost. The rider is ideal along with policies that offer a maturity benefit, or plans that seek to build a corpus for a long term financial goal. In the event of any death or disability, the rider ensures continuity of the policy, and the maturity benefit so received helps to meet the financial goals that you have planned for. Let us take the case of children’s plans to explain this.
Saving and accumulating wealth is of primary importance to build a large corpus for children’s education/marriage. In the event of any unforeseen accident or disability, any loss of income could lead to lapse of policy and thus a situation where the corpus for the financial goal cannot be built.
A Waiver of Premium rider opted along with a children’s plan ensures the policy stays in force to accumulate wealth for the child’s future, and earns returns or benefits on the investment made in the policy. So even in the event of any death or disability, your policy is taken care of. It works its way towards building a corpus for your child’s education or marriage, making it available at the time when it is actually required. Most children’s plans offered by insurance companies come with an inbuilt waiver of premium rider, if not they, could be individually opted for too.
Terms and Conditions of the Rider
The general terms and conditions under which a Waiver of Premium is payable varies from policy to policy and from company to company. In general the typical conditions under which the rider is payable is as follows.
•The disability must result within 180 days from the date of accident occurrence
•Written notice of any claim for the benefit shall be served to the company within 120 days of disability date.
•The payment of the disability benefit and the continuation thereof shall be subject to submission of proof as required by the insurance company.
Exclusions on the Rider
All insurance companies clearly mention when the rider is applicable and what conditions constitute a disablement. One needs to check with the insurer about the complete scope of the rider before taking the plunge. In general, Waiver of Premium is not applicable if the disability is caused by:
•Attempted suicide or self inflicted injuries while sane or insane
•While the Life Assured is under the influence of any narcotic substance or drug or intoxicating liquor
•Engaging in aerial flights, including parachuting and skydiving, other than as a fare paying passenger on a licensed passenger-carrying commercial aircraft operating on a regular scheduled route
•The Life Assured committing any breach of law
•Due to war, whether declared or not or civil commotion
•Engaging in hazardous sports / pastimes, such an s boxing, caving, climbing, horse racing, jet skiing, martial arts, mountaineering, boat racing, underwater diving, etc…