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how Waiver of Premium works in Life Insurance?

Waiver of premium is a rider in life insurance policy that waives off the premium payments by the insured if the policyholder suffers from critical illness, accidental disability or serious injuries. The waiver of premium rider is available on payment of additional premium to the insurance company.


Mr.Rizzu working for an MNC in sales department does a lot of travelling as a part of his job. He is married with two kids and is the sole earner of the family. One day he met a financial advisor who advised Rizzu to take a life insurance policy and explained the benefits of the life insurance as a part of financial planning.

After listening to the financial advisor, Rizzu decided to purchase a term insurance with “Waiver of premium” rider for a period of 30 years. He started paying premium for his term insurance policy yearly and renewed the policy on time.

Once while he was travelling to another city as a part of job, he met with an accident and was admitted to a nearby hospital. The accident was severe and both his legs were amputated. This incident left him and his family in a deep shock since he was the sole bread earner in the family. This accident made him quit from the sales job and search for another job. In the mean time his term insurance policy was due for renewal and he had no money to pay the insurance company.

He intimated this to his insurance company and he received a letter stating that he need not pay any further premiums as all the future premium payments are waived off. All thanks to the “Waiver of premium” which he opted at the time of taking the life insurance policy.

Key Benefits of “Waiver of Premium” Rider:

  • In case of permanent disability of the policy holder, payment of future premiums is waived off.
  • In case of contracting any of the critical illness mentioned in the policy copy, future premium payments are waived off.
  • Premiums paid under this plan are eligible for Tax benefits under Section 80D of Income tax.

Who should take “Waiver of Premium” Rider?

As discussed earlier the “Waiver of premium” rider helps the policy holder in case of his/her disability to pay the premium due to critical illness or permanent disability. This rider is designed to help the policyholder have the insurance benefit even if he/she suffers from any major illness or disability.
Waiver of premium can be as follows:

  • As a part of the policy: Some insurance companies provide the waiver of premium option as an inbuilt cover. The premium for this option is included in the overall premium payable.
  • As an add-on: Few insurance companies offer this option as an add-on. The premium for this is charged separately and is available only if the base policy is opted.

The “Waiver of premium” rider costs only a few bucks if opted as an add-on or rider. But the benefit it provides over a long period of time is immense and it is advisable for everyone to take this rider along with the base policy. If the “waiver of premium” rider is opted, then on the policyholder’s death, disability or critical illness, the future premium payments are waived off and the policy will continue to run until its original tenure while all the other terms and conditions remains the same.

This rider is introduced keeping in mind that the earning capacity of the policyholder will decrease in case of death, disability or critical illness and hence this feature enables to enjoy the life insurance cover without any premium payment.

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