Waiver of Premium (Prämienbefreiung)
Waiver of premium is a supplementary life insurance benefit under which the insurer assumes the ongoing premium payment obligation if the policyholder becomes disabled, without reducing insurance cover.
Concept
Waiver of premium is a widely used supplementary benefit in life insurance under which the insurer assumes the obligation to pay premiums once the policyholder becomes permanently disabled to a contractually defined extent (e.g. from a disability degree of 50 or 66⅔ percent). Cover under the main policy (e.g. death or endowment benefit) remains fully intact, without the insured person having to continue paying premiums.
Structure
Waiver of premium can be structured as a full waiver or as a graduated partial waiver corresponding to the degree of disability. After a typically agreed waiting period (e.g. three to six months), the insurer assesses the degree and expected duration of disability and decides on the scope and duration of the waiver, which is periodically reassessed.
Relevance for Insurance Practice
Waiver of premium prevents a life insurance policy from having to be cancelled or converted into a paid-up, reduced policy due to inability to pay following illness- or accident-related disability; it is therefore an important component of comprehensive disability risk protection within private pension planning.