Income Benefit Rider

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An unfortunate event leading to the demise or permanent and total disability of the sole bread earner of a family can lead to financial distress along with emotional grief. However, one can minimise the financial strain by opting for an Income Benefit rider with their base life insurance plan.

Under this rider, a monthly income benefit is payable to the life assured or their family as the case may be.

Features of Income Benefit Rider

Some of the common key features of an Income Benefit rider as as follows:

  1. Entry Age: This rider is available for purchase to individuals as young as 18 years and usually remains available till the age of 65 years.
  2. Rider Term: The minimum term option available under the rider is usually 5 years and can go up to 30 years.
  3. Rider Availability: The rider can be opted for either at the time of base policy inception or at its subsequent policy anniversaries.
  4. Premium Paying Term & Mode: You can pay the rider premium either as a one-time payment or choose to pay over a period of 5-51 years, depending upon the selected insurer.
  5. Coverage: The rider benefit is payable on the death or total and permanent disability of the life assured.
  6. Sum Assured: The minimum rider sum assured begins from INR 10,000 and can go up to INR 50 Lakh, subject to underwriting.
  7. Benefits Duration: The rider benefit is usually payable for a minimum period of 10 years.
  8. Rider Benefit Frequency: The rider benefit is payable on a monthly basis to the beneficiary.

Benefits of Income Benefit Rider

In the unforeseen event of death or permanent and total disability of the life assured, a monthly benefit equivalent to usually 1% of the rider sum assured is paid to the beneficiary for a period of 10 years or till the end of the rider policy term, whichever is later.

How Income Benefit Rider Works?

Let’s understand how this rider works with the help of an example - 

Name of the Policyholder Mr. Gupta
Age43 years
Rider Tenure20 years
Rider Sum AssuredINR 50 Lakh
Purchase Date of RiderMay 05, 2020
Date of Accidental DeathJanuary 07, 2021

A monthly rider benefit equivalent to INR 50,000 (1% of INR 50 Lakh) will be paid to the nominee for the next 20 years starting from the date of accidental death i.e. January 07, 2021. Thus, the first monthly benefit will be paid starting February 07, 2021 and will continue to be paid till February 07, 2041.

Income Benefit Rider Exclusions

The rider benefit is not payable in case of death/permanent and total disability of the life assured due to any of the following:

  1. Suicide or attempted suicide
  2. Self-inflicted injuries
  3. Pre-existing diseases
  4. War, civil commotion, terrorism, revolt, riot, military use, martial law, etc.
  5. Illegal activity or criminal offence
  6. Use of alcohol, drugs or narcotics
  7. Participation in underwater activities or adventurous sports including car racing, hunting, bungee jumping, mountaineering, martial arts, etc.

Who Should Buy an Income Benefit Rider?

The Income Benefit rider is a recommended rider optio for the following individuals - 

  1. Primary earning member of the family
  2. People who need to travel on a regular basis
  3. Individuals working in factories, mines or other accident-prone environments.

Income Benefit Rider FAQs

  • 1. Can I opt for the Income Benefit rider during a policy year?

    No, the rider is not usually available for purchase during a policy year. However, you can attach it to your base plan either at the time of its purchase or its policy anniversary. If you are planning to buy a term life insurance plan, you can opt for this rider while purchasing the plan, if the life insurer is offering.

  • 2. Are there any tax benefits available with the Income Benefit rider?

    Yes, you can claim a tax deduction of up to INR 1.5 Lakh under Section 80C against the rider premium and a tax exemption for the rider benefits under Section 10(10D) of the Income Tax Act.

  • 3. Is a free-look period available with the Income Benefit rider?

    Yes, usually a free-look period of 15 days from the receipt of the rider policy is available to you. During this period, you can return the policy to the insurer if you are dissatisfied with its terms and conditions and get your premium refunded net of statutory charges.

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