Utah Life Producer Practice Exam

In what type of insurance would you find the waiver of cost of insurance rider?

1. Term life insurance

2. Universal life insurance

3. Whole life insurance

4. Variable life insurance

The correct answer is: Universal life insurance

The waiver of cost of insurance rider is commonly found in universal life insurance policies. This rider allows the policyholder to avoid paying the cost of insurance premiums in the event of a qualifying disability. Universal life insurance is designed with flexible premiums and adjustable death benefits, which is why the costs associated with keeping the policy active can vary. The rider provides financial protection by ensuring that even if the insured becomes unable to pay the costs due to a disability, the policy can continue to remain in force without lapsing. This feature is particularly beneficial for individuals who want both flexibility and security in their life insurance coverage. In contrast, while term life insurance provides coverage for a specific period, it does not usually offer riders like the waiver of cost of insurance since it doesn't have a cash value component. Whole life insurance is characterized by fixed premiums and guaranteed death benefits, making the waiver of costs less relevant. Variable life insurance allows for investment in various options but does not typically include the waiver of cost of insurance rider as a standard feature. Therefore, the association of the waiver of cost of insurance rider with universal life insurance is accurate given its flexible nature and the implications for premium expenses.