Which statement best describes the purpose of the waiver of cost of insurance rider in universal life?

Which statement best describes the purpose of the waiver of cost of insurance rider in universal life?

• A. PAYS the cost of insurance and other expense charges during the insured's disability.
• B. Waives all policy premiums permanently.
• C. Increases death benefit automatically.
• D. Reduces cash value to offset fees.

Answer: (A)

This rider is designed to keep a universal life policy in force if the insured becomes disabled by having the insurer cover the ongoing costs that are normally deducted from the cash value, such as the cost of insurance and other monthly expenses. In other words, during disability the insurer pays those charges so the policy doesn’t lapse just because the insured can’t pay. That’s why the statement describing paying the cost of insurance and other expense charges during disability is the best fit. It isn’t about waiving all premiums (that would be a premium waiver rider), it doesn’t automatically increase the death benefit, and it doesn’t reduce cash value to offset fees.

This rider is designed to keep a universal life policy in force if the insured becomes disabled by having the insurer cover the ongoing costs that are normally deducted from the cash value, such as the cost of insurance and other monthly expenses. In other words, during disability the insurer pays those charges so the policy doesn’t lapse just because the insured can’t pay.

That’s why the statement describing paying the cost of insurance and other expense charges during disability is the best fit. It isn’t about waiving all premiums (that would be a premium waiver rider), it doesn’t automatically increase the death benefit, and it doesn’t reduce cash value to offset fees.