A Waiver of Premium Explained
Usually, if you miss a monthly premium payment on your life insurance then the policy can be cancelled. It doesn’t matter how many years of regular payments you have behind you – if you miss a payment then you risk the policy being void and your family will not be able to claim in the event of your death.
To guard against this, insurance companies offer to include what is called a waiver of premium on some insurance policies. This allows you to miss monthly premium payments, for example, if you have a critical illness or serious injury and are unable to work, while maintaining your coverage.
A waiver of premium therefore acts like a form of insurance on your insurance policy – ensuring your life cover is always in place.
Waiver of premiums covers the monthly premiums on your life insurance policy if you are out of work, until you’re either back in work or the policy term expires. They are most common on life insurance policies, but you can also get a waiver of premiums on related policies such as health insurance and critical illness cover.
How to obtain a waiver of premium on your policy
To get a waiver of premium on your policy, you will need to specify it at the start of the policy, they can’t be added on later. You will also have to pay extra on top of your monthly premium – usually a few extra pounds per month, although this will depend on the insurer and the level of life insurance cover you opt for.
Your life insurance policy’s terms and conditions will outline how you can then activate the waiver of premium if you ever need it, which will include a set of qualifying criteria that you will need to meet. The exact criteria that needs to be met will differ depending on the insurer, but most policies only allow the waiver to be activated after a serious injury or illness occurs that leaves you incapacitated and unable to work.
There are also some policies that can allow you to qualify for the waiver of premium if you are made redundant.
Most policies don’t allow you to apply for the waiver of premium immediately, you will typically need to be off work for either three, six or nine months – and continuing to pay premiums during that time – before you qualify.
Another important point to note is that a waiver of premium benefit can expire before the end of your life insurance policy term. Again, this will be specified in the terms of your policy and will often be set to expire when you reach a certain age – usually 55, 60 or 65.
Do I need a waiver of premium if I have income protection insurance?
If you also have a valid income protection insurance policy then you generally won’t need a waiver of premium benefit on any of the other insurance policies you have.
Income protection insurance covers your income if you are unable to work due to illness or injury, and some also cover unemployment, so you will receive a monthly payout to cover your salary – which can be used to continue to service your life insurance policy along with your other household bills and expenses.
How long does a waiver of premium last after it is activated?
Once the waiver of premium has been activated it will continue to cover your life insurance premiums until either:
- You are able to return to work
- You no longer fulfil the criteria for a claim
- The term of the life insurance policy ends (or you reach a certain age as specified in the policy)
For more information, visit our main life insurance page here.