Most life insurance companies offer waiver of premium and accidental death benefit riders. These riders are the less talked about benefits of owning a life insurance policy. They can sometimes make such a big difference. Let us take some time to examine how the waiver of premium and the accidental death benefit riders work.
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Many life insurance companies sell accident policies. Some are bought for long periods of time and others for short periods of time. You can buy a policy that would pay the face amount to your beneficiary if you should die in any type of accident. Some accident policies specify that you must die in a specific type of accident…for example; an automobile accident or an aircraft crash. These are not the types of policies we refer to when we talk about accidental death benefit riders. These are separate policies. The ones we want to discuss here are the riders added to a base policy. Let us look at waiver of premium and accidental death benefit riders in turn.
- Waiver Of Premium RidersProbably the most popular rider added to a life insurance policy is the waiver of premium rider. For a very small fee, usually a few cents per $1000 of life insurance, you can purchase a waiver of premium rider which will become part of your base policy whether it be whole life, term life, universal life or variable life…If you should become disabled, as long as you are disabled for a minimum of 6 consecutive months, the life insurance company will waive your premium for as long as you are disabled even if it is for the rest of your life. Whenever you are healthy enough to return to work you pick up your premium payment again and you owe the life insurance company nothing for the months that you didn’t pay the premiums. The policy would just go on as if you never missed a payment.With the whole life and term policies the entire premium would be waived, however, when it comes to universal life policies and variable life policies the situation would be a bit different. As universal life is made up of term life insurance and saving and variable life is made up of whole life insurance and an investment portfolio the premiums waived upon disability would be limited to the portion of your payment applied to the term insurance and the whole life insurance respectively.An important thing to remember adding a waiver of premium rider is the definition used by the life insurance company. There are still many life insurance company which suggest that you are disabled when you cannot engage in any occupation because of illness. This definition almost guarantees that your premiums may never be waived. In other words if you can do any type of work you are not considered disabled.The type of definition you need is one that states that if you cannot engage in your “own occupation” then you are disabled. In other words if you are unable to engage in the occupation for which you are trained and in which you are now employed then you are disabled. You may be able to do some other type of work for a reasonable monetary consideration but it is not the occupation that you are trained for and in which you were engaged at the time of the inset of your disability. You are disabled. Look out for this as you would be surprised at the number established life insurance companies who still use the antiquated and misleading definition.
- Accidental Death Benefit RiderAnother very popular rider that you may want to add to your base life insurance policy, whether term, whole life, universal life or variable life insurance policy is the accidental death benefit rider. This is sometimes referred to as the “double indemnity clause”. This rider legally binds the life insurance company to pay to your beneficiary double the face amount of the policy if you should die in an accident. There is a nominal fee for the inclusion of this clause into your policy. Some life insurance companies allow you to purchase what is referred to as “triple indemnity”. Your beneficiary would be paid three times the face amount in this case. Of course you pay additional for this.Let us suppose you died in an automobile accident, in a plane crash or in fact any situation that can be considered an accident the life insurance company has to pay the additional amount. If you, however, engage in any occupation or avocation at the time of application for the policy which would indicate that you would die in an accident the life insurance company may refuse to issue the accidental death benefit rider or charge you extra to add it.
These two riders, the waiver of premium and accidental death benefit riders may well be worth the minimal extra cost.
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