California Life-Only & Accident and Health AgentLife InsuranceMedium
A life insurance policy is issued with a waiver of premium rider. If the insured becomes totally disabled, what is the primary effect of this rider on the policy?
- AThe policy's cash value will be paid out to the insured.
- BThe death benefit will be immediately paid to the beneficiary.
- CThe policy will convert to a term life policy for a reduced amount.
- DThe insured's premiums will be waived, and the policy remains in force.
Show answer & explanationAnswer & explanation
Correct answer: D. The insured's premiums will be waived, and the policy remains in force.
A Waiver of Premium rider is designed to keep a life insurance policy in force if the insured becomes totally disabled. It waives the requirement for the insured to pay premiums during the period of disability, preventing the policy from lapsing.
Why the other options are wrong
- A. The cash value is typically not paid out unless the policy is surrendered or a loan is taken.
- B. The death benefit is paid upon the insured's death, not upon disability.
- C. The policy type and amount are generally not changed by a waiver of premium rider; it simply waives the premium payment.
Waiver of Premium Rider
A life insurance policy rider that waives the payment of premiums if the insured becomes totally disabled, keeping the policy in force.
- Premiums are waived after a waiting period (e.g., 6 months).
- Policy remains in force as if premiums were being paid.
- Cash value accumulation and dividend payments (if applicable) continue.
Memory trick: Waiver, ADB, GIO, Family: Riders add policy power.