Life Insurance: Waiver of premium is it worth paying

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A disability waiver of premium makes premium payments to keep a life insurance policy in force if you become disabled.

No one anticipates becoming disabled. However, three in 10 people entering the workforce will become disabled at some point before retiring, according to the Council for Disability Awareness, and 1 in 7 people can expect to be disabled for five years or more before retirement.

Considering how to pay bills, including life insurance premiums, in case of disability is well worth considering. But whether purchasing a disability waiver of premium rider is the best way to go about protecting yourself depends on your situation.

Life insurance experts say they see many policies lapse because owners become disabled, are out of work and cannot afford to pay premiums. Some agents recommend the disability waiver of premium rider because it eliminates the horrible choice of deciding whether to continue to pay for life insurance coverage or to pay for basic, day-to-day living expenses.

However, some experts say a better approach is to purchase disability insurance to provide broad-based protection rather than addressing the issue piecemeal. Short-term disability insurance pays a percentage of your salary, typically 40% to 65%, for up to two years if you become disabled and can’t work. Long-term disability insurance pays a portion of your salary once short-term disability runs out. Many employers offer disability insurance, but you can also buy individual policies.

If you have no disability insurance, the disability waiver of premium is a good idea and it might be advisable even if you have disability coverage. Remember, disability insurance pays only part of your salary. Would you be able to pay for life insurance premiums in those circumstances?

For more, see 10 useful life insurance riders and how to buy life insurance.