Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Specific to Life InsuranceMedium
A life insurance policy in Texas is issued with a 'Waiver of Premium' rider. The insured becomes totally disabled due to an accident at work. Assuming the waiting period has been satisfied, what is the primary benefit of this rider?
- AThe policy will pay a monthly income benefit to the insured during disability.
- BThe policy will convert to a paid-up policy with a reduced face amount.
- CThe policy's cash value will immediately double upon disability.
- DThe insurer will waive all future premium payments while the insured remains disabled.
Show answer & explanationAnswer & explanation
Correct answer: D. The insurer will waive all future premium payments while the insured remains disabled.
The Waiver of Premium rider is designed to keep the life insurance policy in force by waiving premium payments if the insured becomes totally disabled, preventing the policy from lapsing due to inability to pay.
Why the other options are wrong
- A. This describes a Disability Income rider, not a Waiver of Premium rider.
- B. This describes a nonforfeiture option, which is distinct from the function of a Waiver of Premium rider.
- C. This is incorrect; the Waiver of Premium rider does not affect the cash value in this manner.
Waiver of Premium Rider
A life insurance rider that waives the payment of premiums if the insured becomes totally and permanently disabled, keeping the policy in force without further cost to the policyholder.
- Covers total and permanent disability.
- Premiums are waived, not paid out.
- Policy remains in force.
- Usually includes a waiting period.
Memory trick: Disabled, no pay; policy stays, hip hip hooray!