Colorado Life Producer License Practice Test

What is the waiver of premium clause in an insurance policy?

1. Premiums are refunded if the insured dies

2. Premiums are waived during a short illness

3. Premiums are waived if the insured becomes totally disabled

4. Premiums are waived for minor disabilities

The correct answer is: Premiums are waived if the insured becomes totally disabled

The waiver of premium clause in an insurance policy is a provision that allows the policyholder to stop paying premiums without losing coverage if they become totally disabled. This feature is particularly important as it provides financial relief during a challenging time when the insured may not be able to earn an income due to their disability. When a policy includes a waiver of premium clause, it typically stipulates that if the insured is found to be totally disabled for a specified period, the insurer will continue to provide the life insurance coverage without requiring the payment of premiums. This ensures that the insured can maintain their policy's benefits even while they are facing significant challenges, such as loss of income. Understanding this clause helps policyholders appreciate the additional security it offers, making it a critical element to consider when evaluating life insurance options.