Accidental Death Benefit Explained
Published On Dec 16, 2021 11:00 AM By InsuranceDekho
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The major reason an individual wants a source of income is for financial security and freedom. However, salaries are liable to setbacks, which can occur owing to a variety of causes outside any individual’s control. In order to protect oneself against such dangers, individuals acquire wealth and, while they are at it, they also invest in life insurance coverage. The coverage required for life insurance policies are known as riders.
Riders are optional additional benefits that can be added to an existing insurance. It's an add-on to an individual’s life insurance policy that protects them and their family from death or disability due to an accident. They increase an individual's premium while also broadening their coverage to accommodate more unforeseen situations like accidents, permanent and partial disability, severe disease, and so on. The Accidental Death Benefit Rider is one such rider. To know more about accidental death benefit rider, read on.
How Important Is Accidental Death Benefit Rider?
The Accidental Death Benefit Rider deals with an apparent irreversible loss, i.e., the death of a person. In any case, if the illness proves fatal, the family has to deal with emergency medical expenditures, death of the respective individual and a loss of future funds. As a result, an accidental death rider is critical. The addition of an accidental death benefit rider helps to mitigate the financial impact of the sole breadwinner's death, which comes with both medical expenditures and a permanent loss of income.
How Do Accidental Death Benefit Rider Works?
This rider, in most situations, will provide a lump sum payment in addition to the death benefit provided by the existing life insurance policy to an insured individual's family.
Originally, this type of rider was known as a double indemnity rider since the additional payout possibly doubled the amount of funds the respective individual’s family received. It should also be noted that the reimbursement will be made to the family only when the insurance company certifies that the insured person's death meets the requirements of the rider.
An accidental death benefit rider will most probably increase the respective premiums or payments because it expands their policy's coverage for individuals. However, adding such protection to an existing policy may save the family of the respective individuals from having to deal with significant, unexpected expenditures later.
Importance Of Accidental Death Benefit Rider
Under this rider, an insured individual and their family are entrusted with an extra layer of protection against any unforeseen events. The family of the respective individual also receives the rider benefit amount in addition to the death benefit in the case of the respective individual's uncertain death due to an accident. This rider also ensures financial stability to the respective individual’s family. Allowing the family to cover immediate and everyday expenses, maintain their lifestyle, and reach their goals.
The accidental death benefit rider allows the rider benefit amount to be paid as a single payment or in regular installments, which can provide a regular income for the insured individual's family. The nominee has the option available to them to choose the payment method that best meets their financial needs and situation. The rider benefit is paid in one lump amount together with the death benefit if the nominee chooses lump payment. If the nominee chooses regular installments, the rider benefit is paid in equal installments over a certain period of time along with the death benefit.
Premiums paid toward a term insurance policy and riders are eligible for a tax credit. If the premium payment does not exceed 10% of the value guaranteed, an insured individual under Section 80C and 10(10D) of the Income Tax Act, 1961, can claim tax refunds of up to Rs. 1.5 lakh. The accidental death benefit rider gives a two-fold tax benefit to the insured individual as premiums paid for the rider qualify for tax exclusions under Section 80D of the Income Tax Act of 1961.
Therefore, adding riders to a person's standard term insurance policy protects their family against financial hardships caused by unforeseen circumstances. Riders should always be based on an individual’s unique requirements in order to give more protection for their loved ones and assist them in achieving their life goals.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.