Life & Health Insurance Exam (National Portion)Life InsuranceMedium
A parent purchases a life insurance policy on their child. The policy includes a Payor Benefit rider. If the parent becomes totally disabled before the child reaches a certain age, what will happen to the policy premiums?
- AThe policy will lapse due to unpaid premiums.
- BThe death benefit will be reduced to offset the unpaid premiums.
- CThe child will be responsible for paying the premiums.
- DThe premiums will be waived until the child reaches a specified age or the parent recovers.
Show answer & explanationAnswer & explanation
Correct answer: D. The premiums will be waived until the child reaches a specified age or the parent recovers.
The Payor Benefit rider is specifically designed to waive premiums on a child's policy if the payor (usually a parent or guardian) becomes totally disabled or dies before the child reaches a certain age (e.g., 18 or 21).
Why the other options are wrong
- A. The purpose of the rider is to prevent lapse in such circumstances.
- B. The death benefit is generally maintained at its full amount; premium waiver is the mechanism of the rider.
- C. The child is typically too young to be responsible for premiums, which is why the rider exists.
Payor Benefit Rider
A rider typically attached to juvenile life insurance policies that waives the premiums if the adult premium payor (e.g., parent or guardian) becomes totally disabled or dies before the insured child reaches a specified age.
- Protects the child's policy from lapsing.
- Applies in case of payor's death or total disability.
- Premiums are waived usually until the child is 18 or 21.
- Ensures the child's coverage continues.
Memory trick: Riders that PROTECT your premiums when life gets tough.