A waiver of premium rider is added to an insurance policy for an additional fee.  

It sounds like a good deal. But is it necessary to get a waiver of premium ride when applying an insurance? 

Let’s take a look from two aspects.

1. Exemption of the Insured

Nowadays, more and more multiple illness insurances on the market come with the insured exemption function, that is, for the insured, the premium waiver clause does not need separate additional purchase, which seems quite consumer-friendly.

Different products may have different requirements, but generally speaking, when the insured suffers from serious illness/moderate illness/mild illness/total disability/death, the insured person's premiums can be reduced or exempted.

The waiver of the insured is quite a bargain, since it is equivalent to obtaining greater coverage with a smaller premium, which increases the leverage ratio.

2. Exemption of the Policyholder

In essence, the policyholder exemption can be regarded as purchasing a critical illness insurance for the policyholder. The insured amount is the total premium for the policy purchased for the insured, and the premium is the added cost of choosing this rider.

From this perspective, the policyholder exemption is a reduced amount of regular critical illness insurance.With the increase of the payment period, the insurance amount decreases year by year, which is equivalent to a reduction of the insurance amount for this critical illness, but the expenses required for exemption will not be reduced. Coverage ends when the payment period ends.

Since it is in essence an insurance, it also transfers the risk to a certain extent, which can prevent the policyholder from terminating the policy due to the loss of the ability to pay during the payment period.

From an economic point of view, whether a policyholder waiver of premium is worthwhile depends on three factors:

 1) Product Premium

Different products have different premiums. The higher the premium, the more fees waived, hence resulting in different results.

 2) Claims-Made Policy

If the insured suffers from a serious illness or a mild illness or even dies, the final calculation results can be very different.

 3) Time of Claim

The sooner you get the insurance company to pay the claims, the more the insured is exempted, and the more unpaid premiums are exempted. Considering that the older the age, the higher the morbidity rate, it is more suitable for an elderly to get the policyholder waiver of premium rider.

However, insurance companies will also limit the age of the insured, generally no more than 55 years old.

To sum up, it is not necessary for policyholders to purchase this premium waiver rider, since in some cases it is not cost-effective. 

However, it is still recommended if you are insuring for your child or spouse. Especially if it is a mutual insurance policy between husband and wife, in case any expectation happens to one party of the couple, no payment is required for either husband or wife, the contract remains valid.

（Writer：Pony）