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Insurance · Policy Provisions and Riders

What is a 'waiver of premium' rider?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

If the insured becomes totally disabled, premiums are waived (paid by the insurer) and the policy stays in force

  1. A Allows skipping a premium payment for any reason
  2. B Refunds all premiums
  3. C Reduces premium permanently
  4. D If the insured becomes totally disabled, premiums are waived (paid by the insurer) and the policy stays in force

Why this is the answer

The waiver of premium rider provides that if the insured becomes totally disabled (definitions vary, often inability to work in any occupation) for a waiting period (typically 6 months), the insurance company waives premium payments and continues the policy in force as if premiums were being paid. Cash value continues to accumulate. The waiver continues as long as the disability continues, ending if the insured recovers and resumes working. The rider has an additional premium cost. It is particularly valuable for younger insureds who depend on income to pay premiums and for whom disability would jeopardize the policy. Disability income riders are related but different — they pay a monthly income to the insured rather than just waiving premiums.
Source: NAIC Model Outline, Waiver of Premium

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About this topic: Policy Provisions and Riders

Policy provisions and riders cover the standard clauses — incontestability, grace period, reinstatement, misstatement of age, nonforfeiture options, settlement options — and the common riders such as waiver of premium and accidental death. This is one of 17 Life Insurance questions on policy provisions and riders, each with a full explanation on a single study page.

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