Riders give extra benefits to an insurance policy’s basic coverage. They raise an individual’s premium while extending their coverage to include accidents, disability, serious disease, etc. One example of this kind of rider is known as the Accidental Death Benefit Rider.
It’s a supplement to an insurance plan that covers death or accident-related incapacity. It’s a double-protection rider, thus accidental death is protected by both the policy and the rider’s sum.
What Exactly is an Accidental Death Benefit Rider?
The majority of accidental death benefit riders will make a one-time payment to the family of the insured individual in addition to the death benefit that is provided by the basic life insurance policy. The original name for this type of rider was “double indemnity rider” due to the fact that the additional payout might result in each family receiving double the amount they initially expected. Reimbursement will be provided to the insured person’s loved ones if the insurance provider verifies that the deceased person’s passing was in accordance with the terms of the rider.
Accidental death benefit riders usually invariably result in an increase in the policyholder’s premiums or other payments, despite the fact that the riders expand the coverage provided by the policy. However, by taking precautions now, they may spare their loved ones the stress and financial burden of having to cope with costly emergencies in the future.
Advantages Of Accidental Benefit Rider
Following are the advantages of an accidental benefit rider:
- Added Protection Layer
- The accidental death benefit rider offers an additional layer of financial protection against the unpredictability of life for the life of the insured person as well as for the life of their family.
- In the event that the respective individual were to pass away unexpectedly as the result of an accident, the family of the participant would be eligible to receive a rider guaranteed income in supplementary to the death benefit that would be paid out by the term insurance policy.
- In the event that the life assured passes away, this rider has the potential to provide the policyholder’s family with financial security. The rider benefit given below can serve as a safety net, helping the family meet immediate and ongoing financial obligations, continue with their current way of life, and work toward their stated goals.
- Payouts
- In the event of the insured’s untimely demise, the rider’s benefit amount can be paid out in a single lump sum or in periodic installments to help sustain the family’s standard of living.
- The nominee has the option of selecting the mode of payment that is most suitable to their particular set of financial requirements and circumstances. If the nominee selects a one-time lump sum payment instead of regular installments, the rider advantage is paid in a single, large sum in conjunction with the death benefit.
- On the other hand, if the nominee opts for regular installments, the rider advantage is spread out over a predetermined time period and paid in equal amounts.
- Tax Deductions and Refunds
- The payment of premiums goes toward purchasing a term insurance policy, and tax credits may be claimed for riders.
- An insured individual may be eligible for tax refunds of up to Rs. 1,50,000 lakh under the provisions of Section 80C and 10(10D) of the Income Tax Act, 1961, provided that the premium payment does not surpass 10% of the money insured.
- As a result of the fact that the premiums paid for the rider are eligible for tax exclusions under Section 80D of the Income Tax Act of 1961, the life guaranteed receives a tax benefit that is doubly advantageous.
Conclusion
When a person buys a normal term insurance policy and adds riders to it, they safeguard their family against the financial problems that can result from unanticipated calamities. To give their loved ones a greater sense of safety and to assist them in accomplishing their life goals, individuals should always make their decisions on riders based on the unique needs they have.