Rider is an additional benefit along a life insurance policy. It cannot be taken completely on its own. It is considered as an add-on benefit along with the base policy.
The Waiver of Premium Rider entitles waiver of future premiums to be paid by the policy holder in case of the occurrence of the specified event like death of life insured, disability, dismemberment, etc. So in case because of certain pre-defined reasons you are unable to generate income to pay the premiums of the life insurance policy, because you have availed the Waiver of Premium Rider benefit. The rider is provided with many types of policies especially with child plans, disability plans, unit linked plans, etc.
There are some terms and conditions to get the benefit of the Waiver of Premium Rider (like the ones mentioned below) and they vary from company to company – so check the details before availing the Waiver of Premium Rider.
Some typical Conditions in the Waiver of Premium Rider
- The disability should be for at least 6 months and the policy holder would not ever be able to generate income due to his condition
- The disability benefit may not apply in the first 6 months of the policy
- The disability should have happened only in an accident
- The critical illnesses should be part of the list provided by the company
- The disability should not have happened due to participation in dangerous sporting events (life sky-diving) or during any unlawful activity or attempted suicide or during war.
In case of child plans, if the proposer, usually the parent, dies then the future premiums of life insurance policy are waived off for the child’s benefit. These types of plans are double benefit plans. At the time of death of the life insured, the sum assured would be paid to the family to meet the immediate expenses but the policy continues. The future premiums are waived off from the policyholder, but the insurer continues to pay the premiums on behalf of the life insured, so that the maturity benefit is secured for the child’s future.
In case of disability benefit plans, the future premiums would be waived off if the life insured suffers a total and permanent disability from an accident, etc.
This rider is available at a very nominal extra cost and sometime it is inbuilt within the policy. This is a very important feature as the child’s future gets secured irrespective of the fact whether the parent survives till the end or not. It also provides the parent a peace of mind.
Let us consider an example:
Shilpa Chatterjee purchased a life insurance policy for her 1 year daughter Smita where she insured her life with Base Sum Assured of Rs 20, 00,000 for 20 years with Maturity Benefit of approximately Rs 60 lakhs and a Premium Waiver Benefit rider in case of her death or disability to work. She, however, had to pay an additional premium for the rider benefits.
|Premium without rider
|Rs. 35000, for example
|Premium with accidental rider
|Rs 35000 + Rs 1500 = Rs 36500
Now she wanted Smita to pursue MBA with the money she would have received after 20 years. Unfortunately, after paying 5 premiums Shilpa had a severe cerebral attack and passed away leaving her daughter with her mother.
Thankfully, the life insurance policy that Shilpa had done provided her mother with the money required to bring Smita up. Shilpa’s mother immediately got Rs 20,00,000 and the future premiums of Rs 36500 for the remaining 15 years was paid by the insurer such that Smita did get the maturity benefit of entire Rs 60 lakhs + Bonus (as it was a participating policy) when she was 21 years old to do an MBA, as Shilpa had dreamt of.
|SA paid on death of Life Insured
|Rs 20,00,000 the Base Sum Assured as chosen
|Premium paid by Insurer for 15 years
|Rs 36500 X 15 years = Rs 5,47,500
|Rs 60,00,000 as pre-decided
This rider is very beneficial for people whose children or other family members are dependent on them and their income. And for those who wish to see their dreams fulfilled at any cost.