People buy life insurance to protect what is important to them. Whether used to fund a buy-sell agreement, as part of an estate planning strategy, or just to replace individual income in case of death, life insurance is designed to be here when you can not. But, what happens if-for some reason-the owner of a life insurance policy becomes unable to pay premiums? How will she be able to maintain the coverage she wants for her beneficiaries? The Disability Waiver of Premium is an answer to one aspect of these questions.
Though it isn't pleasant to think about, one in four people will suffer from a debilitating disability at some point in life. At such a time, that person's ability to earn income may be severely hampered. What may have seemed like a reasonable premium to pay with a steady income becomes unmanageable. In addition to the emotional stress associated with being disabled, the disabled person must now wonder how she will be able to continue to provide the protection she wants for her family.
The Disability Waiver of Premium (WP) is a rider that can be attached to a life insurance policy. Like other riders, it is intended to customize the product for an individual's needs, to enhance the coverage of the policy to which it is attached. It does so by waiving the premiums on a policy when the owner has suffered from a debilitating disability that has lasted for at least six months.
Once proof of disability has been furnished, the rider is invoked immediately and retroactively. Provided the Insured is older than five (and as long as the rider is in effect), all premiums due during the time the owner of the policy is disabled are waived. In fact, though the disability must continue for six months before the Waiver of Premium is invoked, its retroactive nature means that New York Life will refund premiums paid from the time of the onset of the disability.
Variations of WP
Though WP serves the same basic purpose (outlined above) for all policies to which it can be applied, some of the particular features vary from product to product.
- For Whole Life policies, if disability begins before the policy anniversary at age sixty and it does not end until after the policy anniversary at age sixty-five, then New York Life will without asking for further proof of disability waive all premiums until age 100.
- For Term policies issued since 1996, if disability begins before the policy anniversary at age sixty and does not end before the policy anniversary at age sixty-five, then New York Life will waive premiums on the policy until age eighty. At that point, New York Life will furnish the Insured with a Whole Llife policy of an equal face amount to the existing Term policy with no further premiums due.
NOTE: With regard to other riders1, WP must be bought separately for individual insurance riders. For example, if someone has a whole life policy with an Increasing Premium Term Insurance (IPT) rider, that person would purchase two waivers of premium one for her base whole life policy and one for the IPT rider.
Protect Your Protection
Once you buy life insurance protection, it makes sense to avoid putting that protection at risk. The Disability Waiver of Premium is one way to protect your protection. Contact a local New York Life agent to discuss just how WP applies to you.
1 Other Covered Insureds (OCIs) are not eligible for WP. Only the base insured's disability controls. If the base insured has waiver of premium, a Waiver of Premium charge is assessed for the OCI, since the premium will be waived if and only if the base insured becomes disabled.
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