Waiver of Premium - How to Bulletproof Your Life Insurance Policy

Waiver of Premium: How to Get a Bulletproof Life Insurance Policy

Waiver of premium is like having insurance on your insurance. So, if you are a wealth creator who wants to make sure your life insurance will be the cornerstone of your wealth and take care of your family no matter what, here are 3 quick questions to ask to make sure you get a bulletproof policy.

But first …

Where Does Waiver of Premium fit into the Cash Flow System?

The waiver of premium rider is an add-on to a life insurance policy, an integral part of your financial life. But life insurance in itself is just one small part of the bigger journey to time and money freedom.

Privatized Banking

That’s why we’ve developed the 3-step Business Owner’s Cash Flow System. It’s your roadmap to go from just surviving, to a life of significance, purpose, and financial freedom. 

The first stage is the foundation.  You first keep more of the money you make by fixing money leaks, becoming more efficient and profitable. 

Then, you protect your money with insurance and legal protection and Privatized Banking

Finally, you put your money to work, increasing your income with cash-flowing assets.

Waiver of premium is a life insurance upgrade feature in the protection component of your cash flow system.

Waiver of Premium Question #1: How Would My Life Insurance Be Impacted If I Became Disabled?

This simple question means you must understand a key idea. What if disability prevented you from continuing working in your current profession, at your current level of income? And what if that limited your finances so that you couldn’t continue to pay premiums for a life insurance policy? And what if you had wanted that policy to be your access to cash and the legacy for your family?

Financial Pressure

You need to know the answer to this question because a life-altering event that causes a disability could not only cause physical challenges, but it could heap on financial strain in compounding ways as well.

If disability were due to an illness or injury, there could be extended medical expenses and recovery time.  You may want or need your spouse close to assist you.  Neither of you may be able to work during this time.

The reason this matters is that if you lose the ability to keep working the way you always have, your primary source of income could become tenuous, or be lost altogether. And that means life would force difficult decisions about what expenses you have to cut out. With medical bills and basic needs requiring top priority, there may not be enough to pay life insurance premiums.

Impacts on Your Life Insurance Policy

With a term life insurance policy, that could mean having to walk away from a policy. In this case, you’d give up the death benefit AND the dollars you’ve paid in premium up to this point.

With a whole life policy, that could mean canceling your policy or choosing another funding method. Options include paying base premium only, paying from policy values, using a policy loan, or reduced paying up. You’d have to accept that these options will reduce your cash value and/or survivor benefit, constricting the policy.

Reasons to Maximize Your Life Insurance if You’re Disabled

But rather than limiting your policy, you’d have far more options if you maximize your cash value and death benefit instead.

The cash value could be an additional source of financial support and peace of mind during this time.

Your survivor benefit could reimburse costs and take care of your family if you are gone too soon.

But how would you pay the premiums going forward to make sure you maximize policy values as much as possible? 

Your Life Insurance Becomes The Savior … Of Itself

Waiver of premium transfers the risk of funding your policy from you to the insurance company. If a disability makes premium payment infeasible, the life insurance company itself becomes the hero that rides in on a white horse.

They pick up the tab and pay your premiums for you so that your policy continues to serve you just as you had imagined when you first put it in place. You wouldn’t even have to think twice about it. That would be one less thing consuming your attention and causing stress during a very stressful period in your life.

With waiver of premium, your insurance policy becomes self-completing, to the greatest degree possible.

To trigger the waiver of premium rider, you would usually need to be fully disabled and unable to do any work for a full six months. And typically, the rider would pay for the base premiums, not optional riders like the Paid Up Additions Rider.

The result?  The maximum continued cash value and death benefit growth, considering the circumstances.  That means you can use your cash to cover other bills, and the policy’s cash value and death benefit will still be there to take care of you and your family.

If you have a term policy, waiver of premium is equally important, because it may allow the option to upgrade your policy by converting to a permanent policy that builds cash value AND gives you a guaranteed death benefit.

So the thing for you to do here is to recognize that a loss of income from a disability could impact your life insurance policy.

Waiver of Premium Question #2: How Common Is Disability?

Waiver of Premium - How to Bulletproof Your Life Insurance Policy

The big a-ha for you with this is that there’s often an underlying motivation to analyze how much of a gamble it would be to beat the odds. 

That’s like running through your neighborhood naked in the middle of the night, forgoing the protection of proper clothing, just because there’s a low probability of being spotted.

As a wealth creator, here’s what this really means: disability is far more common than we would like to think.  And for those impacted, there is a 100% chance that it would be a life-changing event.

  • 25% of 20-year-olds entering the workforce will suffer some income-interrupting disability during their careers (Council for Disability Awareness in a 2014 Consumer Disability Awareness Study)
  • One in 8 workers will be disabled for 5 years or more during their working careers (National Association of Insurance Commissioner’s’ Disability Insurance Tables A and C, assuming equal weights by gender and occupational class)
  • 65% of American workers could not cover their normal living expenses for a year if they couldn’t work (Life Happens Disability Survey, conducted by Kelton Research, April 2012)
  • 12% of Americans, which is more than 37 million people, are classified as disabled (US Census Bureau, American Community Survey, 2011)

Disability results from many circumstances, most of which are not even on our radar. These include back pain, paralysis, heart disease, cancer, mental illness, accidents, and even pregnancy, infections, or nutritional diseases.

You can’t neglect this because losing your life insurance policy due to disability is probable, but it’s also preventable.

To put this into action you should be aware of the risk of disability.

Waiver of Premium Question #3: What Puts Me In The Best Position In The Widest Range Of Circumstances?

The big idea with this question is that while we don’t want to dwell on potential bad things happening in our life, it’s best to be prepared for anything that could happen.

Wealth creators need to understand this question means that in the event of disability, waiver of premium gives you a guarantee that your life insurance premium wouldn’t be a bill you’d have to forgo. That means that your policy performs best, no matter what life throws at you.

This question spells the difference between success and failure for wealth creators. That’s because planning only for the most likely situation doesn’t prepare you to weather the storm if life turns out differently than you’d expected. 

Instead, recognize that certainty has an economic value to you. Bolster your certainty by maximizing your protection, so that you’ll have the best outcome, no matter what. 

Live your best life by preventing a worst-case-scenario from knocking you off the rails. 

Maximum Policy Performance, No Matter What Happens

One of the main reasons many people forgo waiver of premium is that they think they have to give up the goldmine of early cash value. While it has a cost, it is not as much as some would think.

Regardless, all the early cash value and long-term growth a Privatized Banking policy can give you in a best case scenario where you continue premium payments as planned, won’t be worth it if you end up having to modify your premium payments and significantly reduce your planned cash value and death benefit because of a disability if you didn’t have the foresight to see the value of waiver of premium.

Paying for waiver of premium is a small cost to get a self-completing policy.

That means one less thing that you have to think about losing. And that means your life insurance will be there for you when you absolutely need it the most.

Bottom line?

You should make sure that your life insurance policy includes a waiver of premium rider.  This way, your policy will do the MOST for you in the widest range of circumstances, even if disability is part of the equation. 

Your policy will literally be “from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, until death do us part.” 

You don’t have to just hope for a bulletproof life insurance policy that will be the cornerstone of your financial life and legacy and take care of your family no matter what. You can bulletproof your policy by simply understanding these 3 waiver of premium questions, and then taking action.

And here’s one more thing. Did you know, if you’ve ever wanted a lot more detail about whole life insurance, this free guide and video training “The Quick and Easy Guide to Privatized Banking for Investors” has the answers you need. Click Here Now for more.

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Success leaves clues.  Model the successful few, not the crowd, and build a life and business you love.

Rachel Marshall

Rachel Marshall

Rachel Marshall is the Co-Founder and Chief Financial Educator of The Money Advantage. She is known for making money simple, fun, and doable. Rachel helps her clients create time and money freedom with cash flow strategies, Privatized Banking, and alternative investments. Rachel is the co-host of The Money Advantage podcast, the popular business and personal finance show. She teaches how to keep more of the money you make, protect it, and turn it into cash-flowing assets.
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