Waiver of premium vs waiver of cost of insurance
A waiver of premium rider pays the policy's premiums while the insured is totally disabled, after a waiting period, so coverage stays in force. On universal life, which has no fixed premium, the matching rider waives the monthly cost of insurance and expense deductions instead.
Key facts for the exam
- The insured must be totally disabled, as the rider defines it, for an elimination period (for example, 6 months) before premiums are waived.
- Once the waiting period is met, the insurer pays the premiums during the disability, and values and benefits continue as if the premiums were paid.
- On universal life, a waiver of monthly deduction rider covers the monthly cost of insurance and expense charges rather than a set premium.
- Waiver of cost of insurance keeps the charges from depleting the account; waiver of premium pays the contract premium. Neither pays cash to the owner.
The trap. Neither rider pays cash to the policyowner. Fixed-premium policy: the premium is waived. Flexible-premium policy: the monthly deductions are waived.
How the exam asks about it
- How does waiver of cost of insurance differ in effect from waiver of premium on a fixed whole life policy?
- A waiver of premium rider is in force and the insured becomes totally disabled. What does the rider do once the waiting period has been satisfied?
- A universal life policy carries a waiver of monthly deduction rider. How does that rider differ from a standard waiver of premium rider?
- What condition must be satisfied before a waiver of premium rider waives the policyowner's premium obligations?
- What does a waiver of cost of insurance rider cover on a universal life policy during total disability?
- A policyowner wants disability protection on a flexible-premium universal life policy. Which rider most directly addresses the policy's recurring mortality charge?
Where it sits on your state's exam
| State exam | Share of exam | ≈ Scored questions | Outline section |
|---|---|---|---|
| Texas | 19% | 15 of 80 | Policy Riders, Provisions, Options, and Exclusions |
| Florida | 18% | 15 of 85 | Policy Riders, Provisions, Options, and Exclusions |
| Georgia | 19% | 15 of 80 | Policy Riders, Provisions, Options, and Exclusions |
| New York | 20% | 20 of 100 | Life Insurance Policy Provisions, Options, and Riders |