Also called premium waiver or premium cover. In a nutshell, it is insurance for your insurance premiums. Ok stop there! Before you go 'huh? I don't need that', consider the following.

The point of waiver of premium benefits is to pay your policy premiums when you are disabled and unable to work. Extending this logic, if you are disabled and unable to work, your income has likely stopped or reduced, often significantly.

If you have a reduction in income due to a disability, it is likely you may miss a premium payment or two. Miss three (months) and your insurance cover will lapse.

This is not what you want to have happen, especially if you have been disabled. As you now have a medical condition(s) that will likely not be covered if you want through the application process again.

But I have income protection I hear you say

Yes, even if you have income protection it still is an important benefit. income protection has a maximum replacement ratio for your income, typically aimed at having your disability income benefit pay a bit under 80% of your pre disability in the hand income. If 20 plus per cent of your income is not coming in, you may be in the position that you cannot pay your insurance premiums.

If you could not pay your insurance premiums and you were receiving an income protection claim, when you policy lapses for non-payment, your income protection claim will also stop. This is why waiver of premium is a compulsory addition to your income protection policy.

So why don't they build it into the income protection?

Yes, they could, but it is designed to cover the premium on the whole policy, not just your income protection. Because of this, the premium for it changes relative to the whole premium on the policy.

A couple of insurers do build it in and it forms part of the income protection premiums, but this is not as transparent for you. As a separate benefit you can see what it is on it's own. Also as it is a separate benefit you can select it if you do not have income protection on that policy, as often happens.

Another way to look at it is, you have a limit to how much income protection cover you can get, this adds an additional level of monthly benefit to your coverage, equal to the premium on your policy.

Back to the comment if I don't have income protection on my policy, why do I want it if I only have life or trauma on the policy?

Valid question, and a common question, even with other life advisers. The reason you have it on your life policy, or any other benefit, is to ensure the policy does not lapse / fall over when you need it the most. If you were to be disabled, it will be because you have developed a medical condition, this generally means your reliance on having your life or trauma insurance is now even higher. Especially if you have developed a really serious or life threatening medical condition.

The reality is life is terminal, no one gets out alive, but contracting a terminal illness may take years before death becomes imminent. Life Cover only pays a terminal illness benefit if you have less than 12 months to go, you may be disabled for quite some time before this point. This is why waiver of premium is important on life cover.

Ok so I need waiver of premium, what does the wait period have to do with it?

Also a very good question. Waiver of premium often does not cost a lot but can have a profound impact on you and your insurance cover. The wait period on you waiver benefits are also an important consideration.

As I mentioned before if you miss 3 payments on your policy it is at risk of lapsing. I have found people often have financial pressures before a medical disability is identified and addressed. This is particularly true with self-employed people where work busy and income are not always directly correlated. The result is 1 or 2 premiums are missed before the disability is identified and the claim process starts.

What this creates is a situation where the financial pressures can result in policies lapsing before they can be utilised. If you have a 13-week or 3 month wait on your waiver of premium, it will be 2 months too late to save your policy. This is why we recommend taking the shortest realistic wait period of 4 weeks on your waiver of premium benefits.

Why do we raise this point so strongly?

Often people select a 13 week or 90 day wait in their income protection, this is usually due to cost more than anything else, as 13 weeks is the sweet spot for benefit and premiums. Often with policies we see, if 13 weeks has been selected for the income protection, the waiver of premium matches this wait period.

Having a 13-week waiver sets you up for challenges, if there are missed premiums or there is a delay in your diagnosis and payment of disability benefits. The cost difference to have a 4-week wait is not worth taking the additional risk.

Sometimes this is not avoidable as the insurer will often in-force a 13-week wait if you work from home significantly, but starting at 4-weeks is better.

Just to touch on the 13-week wait for your income protection. The majority of people, when it comes to the crunch, can work through no income for this time. There are many things you can do to relieve short-term financial pressure, and family generally get involved and also help. Cash flow is often the initial issue, which is why waiver of premium becomes important even though it is often treated as an add on to the rest of your insurance cover.

The longer term issues are easily solved with a good insurance plan. A slightly longer wait period, because of budget, for long term cover, is better than short term cover on a short wait period.

Whichever way you look at it, dealing with disability is a challenge. Having financial pressure for a short time is much better than financial pressure for the rest of your life if you have a long-term disability.

Want to know more about protecting your income and financial future, get in touch we can talk you through your options so you have a plan that works for you at a budget that you can afford.

The information is only intended to be of a general nature and should not be relied upon in any part without obtaining full details of the products and services by contacting Willowgrove Consulting Limited. All product and service details, terms, conditions and other information are subject to change at anytime without notice. Terms, conditions and fees apply to the various products and services and are available on request. A disclosure document will be provided to you on request free of charge.

But I have income protection I hear you say

Yes, even if you have income protection it still is an important benefit. income protection has a maximum replacement ratio for your income, typically aimed at having your disability income benefit pay a bit under 80% of your pre disability in the hand income. If 20 plus per cent of your income is not coming in, you may be in the position that you cannot pay your insurance premiums.

If you could not pay your insurance premiums and you were receiving an income protection claim, when you policy lapses for non-payment, your income protection claim will also stop. This is why waiver of premium is a compulsory addition to your income protection policy.

So why don't they build it into the income protection?

Yes, they could, but it is designed to cover the premium on the whole policy, not just your income protection. Because of this, the premium for it changes relative to the whole premium on the policy.

A couple of insurers do build it in and it forms part of the income protection premiums, but this is not as transparent for you. As a separate benefit you can see what it is on it's own. Also as it is a separate benefit you can select it if you do not have income protection on that policy, as often happens.

Another way to look at it is, you have a limit to how much income protection cover you can get, this adds an additional level of monthly benefit to your coverage, equal to the premium on your policy.

Back to the comment if I don't have income protection on my policy, why do I want it if I only have life or trauma on the policy?

Valid question, and a common question, even with other life advisers. The reason you have it on your life policy, or any other benefit, is to ensure the policy does not lapse / fall over when you need it the most. If you were to be disabled, it will be because you have developed a medical condition, this generally means your reliance on having your life or trauma insurance is now even higher. Especially if you have developed a really serious or life threatening medical condition.

The reality is life is terminal, no one gets out alive, but contracting a terminal illness may take years before death becomes imminent. Life Cover only pays a terminal illness benefit if you have less than 12 months to go, you may be disabled for quite some time before this point. This is why waiver of premium is important on life cover.

Ok so I need waiver of premium, what does the wait period have to do with it?

Also a very good question. Waiver of premium often does not cost a lot but can have a profound impact on you and your insurance cover. The wait period on you waiver benefits are also an important consideration.

As I mentioned before if you miss 3 payments on your policy it is at risk of lapsing. I have found people often have financial pressures before a medical disability is identified and addressed. This is particularly true with self-employed people where work busy and income are not always directly correlated. The result is 1 or 2 premiums are missed before the disability is identified and the claim process starts.

What this creates is a situation where the financial pressures can result in policies lapsing before they can be utilised. If you have a 13-week or 3 month wait on your waiver of premium, it will be 2 months too late to save your policy. This is why we recommend taking the shortest realistic wait period of 4 weeks on your waiver of premium benefits.

Why do we raise this point so strongly?

Often people select a 13 week or 90 day wait in their income protection, this is usually due to cost more than anything else, as 13 weeks is the sweet spot for benefit and premiums. Often with policies we see, if 13 weeks has been selected for the income protection, the waiver of premium matches this wait period.

Having a 13-week waiver sets you up for challenges, if there are missed premiums or there is a delay in your diagnosis and payment of disability benefits. The cost difference to have a 4-week wait is not worth taking the additional risk.

Sometimes this is not avoidable as the insurer will often in-force a 13-week wait if you work from home significantly, but starting at 4-weeks is better.

Just to touch on the 13-week wait for your income protection. The majority of people, when it comes to the crunch, can work through no income for this time. There are many things you can do to relieve short-term financial pressure, and family generally get involved and also help. Cash flow is often the initial issue, which is why waiver of premium becomes important even though it is often treated as an add on to the rest of your insurance cover.

The longer term issues are easily solved with a good insurance plan. A slightly longer wait period, because of budget, for long term cover, is better than short term cover on a short wait period.

Whichever way you look at it, dealing with disability is a challenge. Having financial pressure for a short time is much better than financial pressure for the rest of your life if you have a long-term disability.

Want to know more about protecting your income and financial future, get in touch we can talk you through your options so you have a plan that works for you at a budget that you can afford.

The information is only intended to be of a general nature and should not be relied upon in any part without obtaining full details of the products and services by contacting Willowgrove Consulting Limited. All product and service details, terms, conditions and other information are subject to change at anytime without notice. Terms, conditions and fees apply to the various products and services and are available on request. A disclosure document will be provided to you on request free of charge.