What is a payor benefit rider?
A payor benefit rider is an optional life insurance add-on that allows a policy to remain active if the payor (the person paying for the policy) is unable to continue making payments due to death or total disability. Payor benefit riders are commonly added to policies taken out on someone else's behalf, such as a parent who buys a life insurance policy for their child and pays the premiums themselves. The payor benefit rider ensures that the child will keep their coverage if their parent dies or suffers a disability that leaves them unable to work.
How does a payor benefit rider work?
If you're paying the premiums for a life insurance policy with a payor benefit rider and aren't the one insured by the policy, then you're considered the payor. In the event you're totally disabled or pass away, then you or the policyholder/insured can file a claim to have the remainder of the policy's premiums waived.
Payor benefit riders typically have an expiration date
Payor benefit riders expire at certain ages, for both the insured and the payor. Some expire when the insured reaches the age of 21, when they may have the financial means to pay for their policy themselves. Payor riders may also expire when the payor reaches retirement age, such as age 60 or 65. The exact ages and conditions when a payor benefit rider expires varies by insurer and the type of policy. Check with your insurer if you have questions about when your policy's payor rider may expire.
PAYOR BENEFIT RIDER VS. WAIVER OF PREMIUM DISABILITY RIDER
A payor benefit rider applies to policies where the payor and the insured are two different people. For example, a parent who buys life insurance for a child and pays for it would be listed as the payor, while their child would be the insured. A waiver of premium disability rider applies to a policy where the insured and payor are the same person, allowing them to keep their coverage if they can no longer pay for their policy due to a qualifying disability.
Do I need a payor benefit rider?
If you're planning to buy a life insurance policy on behalf of a child or other relative, then a payor benefit rider is worth considering. Without it, your loved one may be unable to afford their policy if something were to happen to you. With a payor benefit rider, the insurance company would become the payor and allow the policy to remain active for as long as the rider allows.