Whose Life Is Covered on a Payor Benefit Clause?

A payor benefit clause is a specialized feature in a life insurance policy designed to offer an additional layer of financial protection. This clause functions as a safeguard, ensuring the policy remains active even if the individual responsible for premium payments faces unforeseen circumstances that prevent them from continuing those payments. It operates as a protective measure, particularly for policies intended to provide long-term coverage.

Understanding the Payor Benefit Clause

A payor benefit clause is typically an optional rider added to a life insurance policy, often for an additional cost. Its primary purpose is to waive future premium payments under specific conditions. This feature is commonly found in policies covering dependents, such as children, where a parent or guardian is the premium payor. The clause aims to prevent the policy from lapsing due to the payor’s inability to make payments, thereby preserving the coverage for the insured individual.

The inclusion of this rider ensures that the policy’s benefits, such as the death benefit or cash value growth in permanent policies, continue uninterrupted.

Identifying the Covered Individual

The payor benefit clause specifically covers the life of the premium payor, not the insured person on the policy. This distinction is important because the clause addresses the financial capacity of the person making the payments. For instance, if a parent purchases a life insurance policy for their child, the parent is the premium payor. The payor benefit clause would then protect against the parent’s death or total and permanent disability, ensuring that premiums for the child’s policy are waived.

This design ensures that the policy on the insured individual, such as a minor child, does not lapse if the person financially responsible for it can no longer contribute. While the life insurance policy itself covers the insured, the payor benefit clause provides financial security by waiving premiums based on events affecting the payor.

How the Clause Operates

The payor benefit clause activates upon the occurrence of specific events, most commonly the payor’s death or total and permanent disability. When a qualifying event occurs, the insurance company assumes responsibility for the future premium payments. This premium waiver continues for a defined period, often until the insured reaches a specified age, such as 21 or 25, or for the duration of the payor’s disability.

To activate the clause, a claim must be filed with the insurer, providing documentation such as a death certificate or medical records proving total and permanent disability. During the period premiums are waived, the life insurance policy remains in full force, meaning its benefits, including any accumulated cash value and the death benefit, continue as if premiums were being paid regularly.