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A life insurance policy has a face amount of $500,000. It also includes an Accidental Death Benefit (ADB) rider, which provides for 'double indemnity'. If the insured dies in an accident, what total amount would the beneficiary receive from the policy due to the ADB rider?
- A$1,000,000
- B$750,000
- C$500,000
- D$1,500,000
Show answer & explanationAnswer & explanation
Correct answer: A. $1,000,000
Double indemnity means the Accidental Death Benefit rider pays out double the face amount of the policy if the death is accidental. Therefore, $500,000 (face amount) x 2 = $1,000,000.
Why the other options are wrong
- B. This amount does not correspond to a standard 'double indemnity' calculation.
- C. This would be the payout if there was no ADB rider or if death was not accidental.
- D. This would imply triple indemnity, which is not what the rider states.
Accidental Death Benefit (ADB) Rider
An optional rider in a life insurance policy that pays an additional death benefit, typically double the face amount (double indemnity), if the insured's death is caused by an accident.
- Provides additional benefit for accidental death
- Often called 'double indemnity'
- Specific conditions apply (e.g., death within 90 days of accident)
Memory trick: Riders add benefits, Double Indemnity doubles the payout for accidents.