The basics are covered in our article on the purpose of the waiting period – this piece goes deeper: exactly what is paid in the first months and years, and how products differ from one another.
- During the waiting period, death from illness typically results in a refund of premiums paid.
- In the first year or two, several products pay a graded benefit – with others, the full sum applies from the second year.
- For death by accident, cover is typically full from day one; some products carry a further exception.
The first stage: the waiting period
In the market, the waiting period is typically six months and applies to death from illness. If death occurs during this time, the insurer typically refunds the premiums paid so far – for the family, this is not the sum they were hoping for, but nor is it money lost. Some products pay the full benefit even during the waiting period for certain causes of death – accidents, for instance, and in some cases acute infectious disease. The range of exceptions varies by insurer.
The second stage: the graded years
The end of the waiting period does not always mean the full sum applies immediately for death from illness. Several approaches exist in the market: some products step the benefit up in stages, to the end of the first year and then the second, until it reaches the full sum; with others, the full sum – potentially increased through indexation – applies not long after the waiting period ends; and with others still, a separate, lower sum is set for the first year. Approaches also differ in whether the tier is calculated as a percentage of the sum insured or in relation to the premiums paid.
The accident exception
For death by accident, cover typically applies in full from the commencement of cover – the waiting period and the tiers typically do not apply here. Several products even pay an increased benefit for death by accident. This rule is what gives the cover its immediate value: the policy is not an empty piece of paper from day one.
Why is this a key line for comparison?
Because two products with similar premiums can offer quite different things in the first two years. That is why our comparison table has a dedicated line: "what is paid in the first year, the second, and after – for illness and for accident." If the policy is taken out calmly, ahead of time, the tiers matter little; if the situation is more pressing, this very line can be decisive. It is worth going through this in black and white before you sign.
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