Most people buy investment insurance plans with one simple belief: the policy will help meet some of the non-negotiable goals of life like child’s education, retirement or creating an emergency fund. But there is one question many policyholders often miss at the time of purchase: What happens if I am not there to pay future premiums?
In case of the demise of the policyholder, it can disrupt household income overnight. Families are often forced to stop paying premiums, surrender policies midway, or break investments meant for long-term goals like a child’s education or retirement.
Waiver of premium (WOP) is one of the most underrated features in insurance, yet it can be the difference between financial continuity and financial disruption. It is an add-on benefit, where the insurer waives future premium payments in case of death of the premium payer.
A real-life scenario
Take for instance, Kumar, who wants to financially prepare for his child’s higher studies. With a 20-year horizon in mind, he starts investing Rs 10,000 every month through a systematic investment plan (SIP), aiming to build a corpus of nearly `1 crore over two decades, assuming a 15% CAGR. But there is one aspect Kumar has not fully accounted for: In the unfortunate event of his demise, who would pay the remaining premiums? This is where the WOP feature plays a big role, particularly when combined with a unit-linked insurance plan (Ulip).
Now suppose, Kumar passes away after paying premiums for only one year, amounting to a total investment of Rs 1.2 lakh. Under a regular Ulip without the WOP benefit, the family may receive the life cover amount of Rs 12 lakh, after which the policy would terminate. If the family is unable to continue future SIP contributions after Kumar’s demise, the invested amount of Rs 1.2 lakh may grow to only around Rs 20 lakh over the remaining tenure.
While these may provide some financial support,these are not sufficient to fully secure the original Rs 1 crore goal corpus planned for the child’s future.
WOP Difference
An Ulip with WOP changes this equation. The family would receive a lump sum payout of up to 10 times the annual premium, helping them manage immediate financial needs.
Additionally, the family could also receive a regular income stream to support day-to-day expenses till the end of the policy term. That would mean Rs 1.2 lakh every year for the remaining 19 years, amounting to a total of Rs 22.8 lakh.
Most importantly, the insurer continues funding the remaining premiums, allowing the investment to stay invested in the market for the full tenure. As a result, the child still receives the intended Rs 1 crore corpus for post-graduation, ensuring that the dream remains intact despite life’s uncertainties.
In simple terms, the insurance continues even when the family’s ability to pay does not.
That is the true purpose of goal protection: not just creating wealth for one’s family, but ensuring their aspirations continue uninterrupted, with or without the earning member.
The writer is CBO, Life Insurance, Policybazaar
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.
