What does Waiver of Premium in Life Insurance Plans mean?

25-August-2021 |

At its core, a life insurance policy is a contract between an insurance company and a policyholder that promises a life cover to the latter in exchange for a premium amount. The validity of a life insurance policy, thus, depends upon the regular payment of the predetermined sum of premium by the policyholder.

If the policyholder fails to meet their premium payment regulations, the concerned policy lapses. In this context, there are many circumstances that can lead to the failure of premium payments, including a permanent disability, the death of the policyholder, or the loss of their stream of income. Therefore, it is important to add the waiver of premium feature to a life insurance plan.

 

What is a waiver of premium rider#?

Waiver of premium is a life insurance rider# that prevents a policy from lapsing due to the failure of premium payments by the policyholder. The primary feature of a waiver of premium rider# is that the life insurance policy continues to be valid even if certain events in the life of the policyholder bring about a pause in the stream of premium payments.

In such circumstances, the insurance company keeps paying premium into the policy and the benefits of the original plan continue. Hence adding a waiver of premium rider# to your life insurance policy makes it more comprehensive and safeguards you against the policy becoming invalid owing to a forced inability to honour your premium paying obligation.

 

Here is how you can purchase a waiver of premium rider#

There are several ways to opt for waiver of premium insurance, including the following approaches.

 

1. As an in-built component of your life insurance plan

Some life insurance policies comprise the waiver of premium option as an in-built feature of the plan, thereby offering an additional layer of financial protection to the policyholder. Therefore, you receive the benefit of this feature without paying any additional premium.

 

2. As an additional life insurance rider#

If the life insurance plan you have selected does not include a waiver of premium rider#, you can add the feature as a life insurance rider#. This option enhances your financial security with the payment of a marginal additional premium.

For instance, you can choose the Tata AIA Life Insurance Waiver of Premium Plus (WOPP) Rider(UIN- 110B029V02) that has been designed to cover the eventualities of permanent disability and the death of the policyholder.

By adding the Tata AIA waiver of premium rider# to your insurance policy, you can be assured that your inability to pay the policy premium owing to the events mentioned above does not affect the validity of the plan.

Benefits of a waiver of premium rider#

The life insurance waiver of premium rider# provides several significant benefits to the policyholder, some of which have been discussed below.

 

1. Prevention of the lapse of the policy

The primary benefit of adding a waiver of premium benefit rider# to your life insurance policy is that it prevents the policy from lapsing as a result of default in premium payments. It is important to note that you cannot file a life insurance claim against a lapsed policy. Hence this add-on feature keeps your policy active despite no further payment of the predetermined instalments of premium.

 

2. Continuation of the policy even after the death of the policyholder

Most life insurance policies end in the event of the death of the policyholder within the tenure of the policy. The nominee of the policyholder receives the predetermined death benefit under this scenario. However, if you add the waiver of premium rider# to your life insurance plan, the plan will continue till the end of its tenure even in the following scenarios.

  • The death of the policyholder and subsequent payout of the death benefit to their nominee

  • The occurrence of a total or permanent disability that prevents the policyholder from continuing to pay the premium amounts for the policy as scheduled

Therefore, it is advisable to add the waiver of premium rider# to your life insurance policy.

 

3. Protection of your financial goals

A permanent disability can lead to complete disequilibrium in your life, leading to a failure to meet your financial obligations and continue the pursuit of your financial goals. In addition to substantial medical expenditure and emotional trauma, a family can be forced to contend with intense financial strain in the wake of the aforementioned situation. The inclusion of a waiver of premium benefit enables you to keep your insurance policy active despite not being able to make further premium payments.

Therefore, the financial goals for which you had purchased the policy remain undisturbed. For instance, if you had invested in the concerned policy to accumulate a substantial corpus for the educational experience of your child, the expenses associated with their wedding, or to plan for your post-retirement plan, those financial goals can be kept intact even in the event of a permanent disability if you opt for waiver of premium insurance.

4. Financial security for your family

The financial security of your family is vulnerable to being jeopardized as a consequence of the lapse of your life insurance policy following a failure to pay the premium. In this context, the life insurance rider# of waiver of premium allows you to keep your family’s financial future safe even if you cannot make further premium contributions to your life insurance policy. It is worth noting here that you can also purchase a waiver of premium rider# for critical illness and safeguard yourself against the failure to make premium payments following a diagnosis of a critical illness.

5. Tax* Benefits

One of the most significant benefits of a waiver of premium rider# is the tax* relief associated with it. In this context, Section 80D of the Income Tax Act, 1961 allows a policyholder to claim a maximum tax* deduction of ₹25,000 for subscription to a health insurance policy or a health-based rider purchased with a life insurance plan. Furthermore, senior citizens are eligible for a tax* deduction of ₹50,000 under Section 80D.

According to Section 80C of the Income Tax Act, 1961, a policyholder is eligible for a tax* deduction of up to ₹1,50,000 as the premium paid towards a life insurance policy subject to the premium not exceeding 10% of the sum assured. In addition to this, the death benefit received by the nominee of a policyholder is exempt from income tax* under Section 10(10D) of the Act.

Therefore, there are significant tax* benefits associated with a life insurance policy with a waiver of premium rider#

 

Conclusion

Owing to the wide range of benefits offered by a waiver of premium rider#, it is advisable to add it to your life insurance policy. In addition to providing you a life cover, this feature makes your policy more comprehensive and helps you secure the finances of your family in the event of a permanent disability or a critical illness befalling you.

L&C/Advt/2021/Sep/1670

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • # Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please refer to the rider brochure or contact Tata AIA Life's Insurance Advisor/ branch.