Difficulty: Medium

Average Score: 50%

Which of the following statements is TRUE regarding a waiver of premium rider?

Rationale

There will be no change in the policy other than the insured no longer has to pay the premiums on the policy.

A waiver of premium rider allows the insured to stop paying premiums if they become disabled, while the policy remains in force without other changes. This provision ensures that the insurance coverage continues despite the inability to pay premiums due to qualifying circumstances.

A (The death benefit will be reduced by the amount of the unpaid premiums.) YOUR ANSWER

This statement is inaccurate because a waiver of premium rider ensures that the death benefit remains intact regardless of unpaid premiums due to the insured's disability. The death benefit is not diminished; the policy continues to provide the full face value.

B (The policy's cash value will continue to grow, but at a slower rate because the insured is no longer paying premiums.) YOUR ANSWER

While it is true that the cash value may continue to grow, it does not necessarily do so at a slower rate due to the waiver rider. The cash value accumulation is determined by the terms of the policy, and the waiver of premium does not inherently alter the growth rate of accumulated cash value.

C (The insured will automatically become eligible for accelerated death benefits.) YOUR ANSWER

This statement is misleading as eligibility for accelerated death benefits does not automatically arise from having a waiver of premium rider. Accelerated benefits are typically contingent upon specific conditions, such as terminal illness, and are separate from the waiver of premium rider provisions.

Conclusion

A waiver of premium rider is designed to maintain an insurance policy without requiring premium payments during periods of disability, without changing other policy features such as death benefits or cash value growth rates. The correct understanding is that the insured continues to enjoy the same policy benefits, minus the premium payments, ensuring continued coverage without penalties or reductions.

Related Questions

View all