In order to achieve long term financial goals, investors tend to buy a bouquet of financial products and keep them in their portfolio such as equity, fixed income instruments, term plan as well as ULIP (unit linked insurance plan). Since these products are bought with long term goals — such as retirement, higher education and buying a house — in mind, it is imperative to keep these insurance policies operational.
However, some of the policyholders or their nominees might lose continuity of their policy in case of an unfortunate event such as death. This is a phenomenon (letting the policy lapse) must be avoided at all costs. This can be done, interalia, by buying a waiver of premium (WOP) rider.
What is waiver of premium rider on ULIP?
This is an important rider that one is encouraged to buy along with the insurance plan to ensure that the policy does not lapse for non-payment of premium. The non-payment could occur because of the policyholder’s death or disability.
In other words, a ULIP that might come to an end after the policyholder’s death would continue till the end of policy’s tenure when the policyholder opt for this rider (WOP).
Why to opt for it?
One of the key reasons for buying this rider is to keep the insurance policy active in order to stay true to financial goals. This provides an additional cover of sorts as it keeps the ULIP’s status active and safeguards both its investment and insurance benefits.
Before one happens to think twice about the waiver of premium, one should remember that adding this feature at the time of ULIP purchase is crucial and it cannot be done later.
“The waiver of premium option in ULIPs plays a pivotal role. This feature steps in during unforeseen circumstances like disability, critical illness, or the demise of the policyholder, ensuring that the insurance company continues premium payments,” says Vivek Jain, Head of Investments at Policybazaar.
Financial goals
A number of investors believe that opting for one crore term cover is adequate to sustain monthly family expenses in case of an unfortunate event. However, certain non- negotiable life goals, such as buying a home for the family, funding children’s higher education and marriage, or providing a lump sum for elderly parents, demand more than just monthly sustenance.
In such a scenario, a ULIP with the waiver of premium features can address these non-negotiable financial milestones.
It ensures double advantage by securing the family’s immediate needs through term coverage and aligning investments to meet substantial future financial goals.
This underscores the fact that the WOP in ULIPs can help policyholders achieve their long-term financial aspirations besides day-to-day expenses in the wake of life’s uncertainties.
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Published: 22 Dec 2023, 02:25 PM IST