Waiver of contribution is one of those options usually available under a life insurance or critical illness plan which many people may not be aware of.

It may be mentioned by the financial adviser when the sale is being made but often it is not included for one reason or another.

What is Waiver of Contribution?

Quite simply it allows the premiums (or contributions) to be “waived” on a life insurance or critical illness plan in the event of the life assured not being able to work through accident or sickness.

There is usually a “deferred period” before this option kicks in – normally in the order of 3 months. After this period, if you are still off work then the benefit of the waiver starts and you no longer need to make regular payments into the plan.

This benefit continues until one of the following events occurs – return to work, make a claim under the policy or the policy ends.

So why is Waiver of Contribution so important?

Consider the situation – you have not worked for a long period of time due to ill health – it must be serious to keep you off work for such a long period of time.

It is at times like this that you actually need the life insurance or critical illness cover more than ever – it is also at times like this that you may not be able to afford to continue paying premiums, either through an increase in expenditure (medications, treatment, partner losing time from work to look after you etc) or a decrease in income.

Waiver of contribution gives peace of mind that your protection arrangements can remain in place at the time that you most need them to be in place.

Shrewd Action

Always consider the benefits of adding waiver of contribution to any life insurance or critical illness plan you take out.

Have you made a claim under waiver of contribution? If so, please let us know of your experience below.

2 Thoughts on “Waiver of Contribution

  1. Mike on 30/11/2010 at 5:21 pm said:

    What if a agent sells you a plan with WOC,and you then find it ends before the plan has reach maturity,what rights do you have?.also what rights do you have when the company then say it was in the terms and Conditions which you have never had,and the Schedule received,plus the application form makes no mention of the WOC ending before maturity.

    I would be very interested for comments regarding this issue.

  2. I can’t really comment on individual cases per se, but I do seem to recall a number of companies did provide WOC which terminated before the end of the contract.

    The reason for this was to keep the costs “affordable” – it is during the earlier years of the plan that the planholder needs most protection (based on the assumption our wealth increases as we get older). The likelihood of a claim in later life increases dramatically and this would therefore increase the premium payable.

    If the plan was sold recently I would have expected the applicant to have been provided with an illustration, a key features document and a suitability report. These would have shown that the WOC ends before the plan did.

    Of course, if you make a complaint against an adviser/firm and are not happy with the outcome you should have recourse the Financial Ombudsman Service.

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