Final answer:
The waiting period under a waiver of premium rider typically ranges from 3 to 6 months. Charging an actuarially fair premium to a group as a whole instead of individually may lead to adverse selection and increased risk to the insurance company.
Step-by-step explanation:
The waiting period under the wavier of premium rider in an insurance policy typically ranges from 3 to 6 months. This waiting period, also known as the elimination period, is the time from when a disabling event occurs until the premium waiver takes effect. It is designed to ensure that the disability is likely to be long-term before the insurance company waives the premium. If the insurance company were to charge an actuarially fair premium to the group as a whole, rather than to each group separately, it could result in adverse selection. Healthier individuals or groups may choose to leave the pool due to higher premiums, which could lead to a less healthy pool overall and increased risk to the insurance company. Charging separately allows the insurer to adjust premiums based on the risk level of individual groups, maintaining balance within the insurance pool.