Life Insurance with Policy Riders
most people think of life insurance, the first thing
that usually comes to mind is, "How much do I need?"
However, there are other aspects of life insurance policies
that provide important benefits and are worth considering.
example, riders essentially allow policy owners to give
themselves and their beneficiaries added protection
in the face of certain events. Among the large number
of riders that life insurance companies offer, one of
the more frequently utilized is the "waiver of premium."
waiver of premium rider protects you in the event that
you are disabled and can no longer afford to pay your
life insurance premiums. Not only does the insurance
company pay your premiums pursuant to the terms of the
contract, but if you own a whole life policy, the policy
cash values and dividends generally continue to grow.
These increasing policy values can be a ready source
of income that you can use to help pay your expenses
if you are disabled and can no longer work. You could
access these values through loans or surrenders. (Note
that loans and withdrawals may result in adverse tax
consequences and may carry interest. Cash values and
death benefits may be affected, too.)
an applicant's insurability, the availability of the
waiver of premium rider may also be based on certain
risk factors, such as general health and past medical
history. Once issued, most policies contain important
eligibility requirements before the waiver of premium
rider will take effect. Policies generally contain a
specific waiting period (e.g., six months) before premiums
begin to be paid under the rider. Some policies apply
waiver of premium coverage differently for a disability
occurring prior to age 60, compared to one occurring
between the ages of 60 and 65. Under many policies,
the waiver of premium provision terminates at age 65.
While the waiver of premium rider on term and whole
life policies will generally cover the entire premium,
the waiver may work a little differently on other types
of policies, separating the premium waiver for the cost
of insurance from that associated with the cash value
or investment fund.
definition of "disability" in your policy is also crucial,
because it determines when your obligation to pay premiums
ends. The key is usually whether you are "totally disabled"
under your policy's definition. While some policies
consider total disablement to be when an illness or
injury leaves you unfit for your profession, other policies
may contain a clause that states you must be unfit for
any type of work.
riders tend to take a "back seat" when planning insurance
needs, because so much of the initial focus is on how
much coverage is necessary to provide adequate protection.
However, part of the process of determining adequate
protection should also involve taking advantage of the
opportunities to customize your life insurance policy
so it fully meets your needs.
© 2006 Liberty Publishing, Inc. All rights reserved.