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When does a Waiver of Premium benefit make sense? |
| Waiver of premium is a benefit provided under certain life insurance plans or made available as an additional ‘rider’ on payment of an extra premium. The benefit associated with this comes into play if a policyholder is unable to pay his/her premiums on account of a serious injury or disablement resulting in loss of ability to earn an income or in some policies on account of the life insured’s death. In such scenarios, having a waiver of premium benefit allows the policy to continue and the insurance company pays the premiums that were to be paid by the life insured. The time period of premium waiver might vary depending on various product terms and conditions. The premium on this rider is set in accordance with the premium being paid on the base policy and other riders, if any.
How and When is waiver of premium beneficial?
Like most riders, waiver of premium brings an additional level of protection to your life insurance policy. The premiums associated with this rider are slightly higher than most other riders since the complete obligation of making premium payments and continuing with the base risk cover of the policy is being taken over by the insurance company. The benefit makes most sense when the premiums associated with your life insurance policy are fairly high or in products such as child plans where the underlying need is to be able to save over a longer period of time towards building a large corpus for a future financial goal such as your child’s education. Most child plans, therefore, have waiver of premium as an inbuilt benefit of feature as part of the product itself.
A typical child plan with an inbuilt waiver of premium will thus have 2 main benefits – a death benefit and a waiver of premium benefit. Such a product will ensure that the sum assured is paid out in the unfortunate event of the life insured’s death. The insurance policy however will continue even after the payment of this death benefit. The insurance company will pay all future premiums towards the policy such that the goal of building an education or marriage related corpus for your child is still pursued even when you are not around. These future premiums being paid by the insurance company will continue to earn any investment returns or benefits and will together with these returns be paid out at the time of maturity of the policy. The benefit ensures that your financial plan towards saving a meaningful sum of money for your child’s future needs continues uninterrupted even if you are not around.
For products where this benefit is not an inbuilt feature, it can be purchased as a rider if available as an option with the underlying product. What needs to be kept in mind are the associated terms and conditions with respect to when and how the benefit will be applicable. Different products of various companies may have different definitions and eligibility criteria around when the benefit will be payable i.e. what constitutes a complete disablement or critical illness that results in inability to pay your premiums. There might also be varying conditions around the time period for which this benefit is available. Like in any other insurance product and category it is always recommended to find out about all relevant details, clauses and terms & conditions of the available options before making your choice.
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