Waiver of Premium
Waiver of premium is an optional extra benefit, which can be taken out at the time of original application for a policy.
It is a valuable benefit, and we usually recommend that waiver be selected when applying for a policy.
If a policy has waiver of premium benefit, and ill-health (see below) prevents the insured person from working, the insurer will waive the premiums for the duration of the insured person’s illness, if necessary, until the policy ends.
The benefits of the policy are maintained, which means that if an insured event occurs (e.g. the insured person dies) the benefits of the policy are paid out in full.
In the event the insured person recovers their health, premiums have to restart, but the premiums that were waived while the person was ill and unable to work are not repayable to the insurance company.
If the insured person makes a claim for premiums to be waived, there is usually a period of time, known as the "deferred period", and premiums will not be waived by the insurance company until the end of the deferred period.
A deferred period is commonly of six months duration, in which case, the insurance company would waive the premiums from the start of month seven.
If waiver of premium benefit is not selected at outset, it normally cannot be added later. However, some insurance companies do allow it to be added upon request, but they may request evidence of good health.
Definition of ill-health:
The definition of "ill health" would be stated in the policy conditions. For example, the best definition of ill health normally is "an inability to carry out - for reason of ill health - the material and substantial duties of your own occupation".
(Own occupation is usually defined as the duties your are carrying-out in the 12 months prior to making a claim for your premiums to be waived.)
Deferred Period:
In the event you are unable to work due to ill-health, there is a short period of time, known as the 'deferred period' before the waiver of premium benefit will start to pay the premiums on your policy.
This is usually 6 months, but some insurers offer a shorter deferred period of 3 months.
During the deferred period, you will need to continue to pay your normal premium, but from the end of the deferred period, and for the duration of your inability to work due to ill-health, the insurance company will pay your premiums for you, if necessary, for the full remaining term of the policy.
