What You Need to Know About Accidental Death Insurance

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For the past 30 years, the U.S. Centers for Disease Control and Prevention has been collecting and analyzing causes of death in the United States.  It comes as little surprise that heart disease and cancer are the top two causes, but many people would be surprised to learn that among all causes of death, accidents rank fourth on the list.

Almost 150,000 people die from accidents each year according to recent CDC statistics. Accidents also produce more than 28 million emergency room visits annually.  Some of these are for relatively minor issues, but in other cases, a visit can be to treat a traumatic and life-threatening situation.

If you are in one of the categories of higher risk for an accidental death or a traumatic injury, there is a solution that will give you an added layer of protection for you and your family: Accidental Death and Dismemberment Insurance (AD&D).

What is Accidental Death Insurance?

As the name implies, accidental death insurance pays your beneficiaries if you are killed in an accident. An “accidental death” means a death caused by an unforeseen circumstance unrelated to the body. This means the death cannot be caused by illness or the insured’s physical condition.

For example, if you buy an accidental death insurance policy with a face amount of $100,000 and you die as a result of the one of types of accidents listed in the policy, your beneficiaries would receive the full face amount.

Accidental death insurance can also cover if you are injured and suffer a loss, but do not die. In most cases, Dismemberment coverage pays a percentage of the face amount of your policy. The percentage is based on the seriousness of the injury. For example:

  • If you lose a thumb and fingers on the same hand, you might collect 25 percent of your face value.
  • If you lose a hand, a foot, or sight in one of your eyes, you might receive 50 percent of the face value of your policy.
  • For injuries with multiple losses, such as losing a hand, a foot and the loss of sight in both eyes, you could be compensated the full 100 percent of your policy value.

As you can see, there are many variables when it comes to accidental death insurance.

In addition, as part of the payout, some policies will cover funeral costs or unsuccessful medical treatments prior to death.  Other policies also provide for income payments, making it possible for your loved ones to remain on stable financial footing after you pass away.

What Does Accidental Death Insurance Cover?

To collect on an accidental death insurance policy, your death or injury must be due to one of the qualifying events listed in your policy.  Some examples of what would qualify as an accidental death event include:

  • Motor vehicle accident
  • Pedestrian or bike rider hit by a car
  • Boating accident
  • Poisoning
  • Accidental drug overdose
  • Drowning
  • Choking
  • Fall
  • Work related accidents
  • Fire
  • Accidental gunshots
  • Victim of violent crime

In terms of trends, it should be noted that among the various kinds of accidental deaths, people age 25 and younger are the mostly likely to die in car accidents.  People who are 65 and older face a much higher incidence of falls in their homes, which can be deadly.  The CDC has also seen a rise in accidental poisonings from prescription drug abuse in people of all ages.

Accidental Death Insurance vs Dismemberment Insurance

A dismemberment claim will provide a portion of the death benefit while you’re still living.

For example, if you accidentally lose a leg or an arm, a typical policy might pay half of the death benefit. If you lose two or more limbs (any combination of arms and legs), then most policies pay the entire face value of the policy.

Many Accidental Death and Dismemberment policies also cover losses of vision. The same standards apply here as well.  A loss in one eye or ear will typically result in a payout of 50 percent of the death benefit.  If both eyes are lost, then a policy holder would receive the full-face value.

Some accidental death insurance policies provide coverage for loss of speech or hearing, and different forms of paralysis, including paraplegia, triplegia, hemiplegia, or uniplegia (paralysis).

Does Accidental Death Insurance have cash surrender value?

No.

Accidental death insurance does not accumulate cash value and therefor does not offer any type of cash surrender during the duration of the policy.

What is Not Covered by Accidental Death Insurance?

When an act is not covered by accidental death insurance, it is known as an exclusion.  People often times get confused about what qualifies, and this can lead to arguments and occasionally litigation during a difficult time.  That’s why it is best to do your homework up front and make sure you completely understand the details of your policy before you purchase.

Those who don’t do their homework may be quick to assume that when someone dies unexpectedly that it should be considered an accidental death, regardless of the circumstances.

Unfortunately, an insurance company will not look at things that way.

Before they will pay out on an accidental death insurance policy, they will need to know the specific cause of death, or the specific cause of the traumatic injuries leading to the filing of, for example, a dismemberment claim.

In instances of a death, the cause will be stated on a certified death certificate which will provide proof that not only did a person pass away, but also how they passed away.

Many people get confused between passing away from an illness and passing away from an accident.  For example, if you die from lung disease, this is considered an illness, and as such, it will not be covered under an accidental death insurance.  However, if you die from an auto accident, and it is clearly stated on the death certificate, then you should have no trouble collecting a payout from your carrier.

If someone suffers a stroke or heart attack while driving and those took place before the accident, and the accident resulted from that bodily malfunction, the policy would not pay.  Similarly, if an insured involved in an auto accident died from an infection contracted in the hospital, the policy would not pay.

Does Accidental Death Insurance Cover Heart Attack, Stroke, or Cancer?

In a word, no.  All of these are considered natural causes of death due to a medical condition.  The cause of death from any of these will be stated on the death certificate and you will be denied a payout. Your chances of collecting on a claim are either enhanced or lessened depending on if the word “accidental” was used on the death certificate.

Does Accidental Death Insurance Cover Homicide, Drug Overdoses, or Surgery?

Typical exclusions of accidental death insurance coverage include death during surgery, resulting from a mental or physical illness, bacterial infection, hernia, or a drug overdose.  Basically, if an act is self-inflicted or is a medical condition vs. an actual accident, a policy will not pay.

It is important to read the fine print when applying for this kind of policy.  In general, high risk or illegal activities will also not be covered under most accidental death insurance policies.  Some examples may include:

  • Drinking and driving
  • Skydiving
  • Bungee jumping
  • Car racing
  • War
  • Suicide or attempted suicide
  • Drug overdose
  • Surgery

In cases of murder or manslaughter, if a person is an innocent victim, then a policy would pay out.  However, if that person was involved in committing a crime, then the payout would be denied.  And in cases where the beneficiary is the one who committed the murder (i.e. a wife killed a husband and she was the named beneficiary), then she would not receive the payout either.

Does Accidental Death Insurance Cover Accidental Deaths While Traveling?

Yes.  There are two instances when this is the case.

In addition to other accident scenarios, accidental death insurance policies cover death when traveling when a person is a commercial passenger on a plane, bus, taxi, ferry, train or any other form of public transportation.  At other times, a policy will be issued that covers only the period when a person is a passenger on any of these forms of transportation.  This is known as common carrier accidental death insurance.

It is possible to purchase a common carrier accident insurance policy or a 24-hour accidental death insurance policy that can pay you as much as $1 million when you die or lose a limb and your eyesight in a common carrier accident.

If you ever need to file an accidental death claim on an accidental death insurance policy, make sure that the insurer knows that it was a common carrier accident because additional benefits, as much as double in some cases, are paid out under these circumstances.

What are Other Special Travel Situations When An Accidental Death Insurance Policy Might Be Issued?

It’s no secret that there is global unrest in the world, and frequent international travelers might want to consider purchasing a policy that covers accidental death and dismemberment coverage for an act of terrorism.  Optional high-risk destination coverage and optional war zone destination coverage is also available.  In most cases, it is available to anyone traveling outside their permanent home country.

For infrequent travelers who are going to high risk areas or war zones, single round-trip coverage is also available with coverage up to $1 million, including acts of terrorism on a common carrier.

Currently, some countries are considered a much higher risk to travel to than others, earning them a War Risk Area 1 designation.  Those countries are Iraq, Afghanistan, Pakistan, Israel (West Bank & Gaza Strip), Iran, Somalia, Chechnya, North Korea, Palestinian Territories, and Yemen.

High limit travel accident insurance is also available and can provide payout benefits from $100,000 to $20 million.  It has many options, including single-trip or annual coverage, full 24-hour coverage, all common carrier coverage, or flight accidents only.

Kidnapping and extortion are very real and growing threats across the globe.  Many companies have high profile executives or have significant business interests in regions that are beset by lawlessness and high degrees of danger.  Other companies handle large sums of cash or work with sensitive information, also making them vulnerable targets for criminals.  Kidnap, ransom and extortion insurance protects against financial loss and provides services to assist policy holders by making crisis management and security consultants available to manage incidents.

Many companies purchase common carrier accident insurance plans for their employees and include it as part of their employee benefits package. Life insurance agents may also recognize this type of plan as an inexpensive way to enhance a client’s insurance portfolio.

Is There Such A Thing as Accidental Death Insurance For Dogs?

Absolutely.

Accidental death insurance for animals is a viable coverage for valuable show and breeder dogs and horses.  You can purchase various types of coverage that not only covers accidental deaths, but by deaths that are natural as well.  Theft, air and ground transit coverage can also be purchased.

To qualify, an animal must be in good health and you will need to supply a current veterinary certificate of health before a policy can be issued.  Age and some other restrictions may apply as well.

You can purchase a more limited form of AD&D coverage that only protects against certain forms of peril:

  • Fire, lightning or smoke
  • Earthquakes or floods
  • Windstorms, cyclones or tornadoes
  • Explosions
  • Accidents while traveling, including loading and unloading
  • Drowning
  • Attacks by dogs or wild animals
  • Theft

Can I Get Accidental Death Insurance for Mortgage Protection?

Accidental death insurance payouts can be used for any purpose after a beneficiary receives funds.  These funds can be used to cover a mortgage or help make mortgage payments going forward.

Because a home is a family’s single largest asset, and in many cases the single largest debt, it could present a significant financial hurdle for surviving family members when a breadwinner passes away or becomes incapacitated.

To cover this specific financial concern, many people purchase mortgage protection insurance (MPI).  It is a form of life insurance that is specifically designed for people who want to make sure their home mortgage is paid if they die or become disabled.

With an MPI policy, when you die, the insurance proceeds are paid directly to your mortgage company.  If your policy pays upon disability or job loss, payments can also go directly to your mortgage company, but generally only for a specified period, typically a year or two.

In most cases, disability policies pay only the principal and interest on your mortgage, although some companies have riders you can add to the policy to pay other home expenses, like homeowners’ association fees.

You need to think of mortgage protection insurance as life insurance for your mortgage.  As such, what it covers is very narrow and clearly defined, depending on the options you choose.  Insurers will allow you to choose just a death benefit, or add disability, long-term illness or unemployment riders as well.

For all living benefit payouts, policies will start paying out either 31 or 60 days after you are unable to work.  However, some policies are known as “day one” policies and the benefits you receive may be backdated to the date you were first out of work.

Comparing Accidental Death Insurance vs Term Life Insurance

There is some overlap with accidental death insurance and life insurance, but it should not be considered as a replacement.  You should view accidental death insurance as a supplement to life insurance and disability insurance because it is generally considered as having a very narrow scope of coverage.

Think of it in these terms: If you pass away and your family lost your income, life insurance will cover you in most all instances whether it is due to an accident or natural causes.

With accidental death insurance, your family would only receive a payout if you died due to an accident.  Premiums for AD&D are generally very low because the scope is so narrow, so this makes for a nice added form of coverage.

In addition to these two forms of insurance, you should also consider adding disability insurance to cover long-term issues that might come up that are not due to accidents.

How Much Accidental Death Insurance Do I Need?

As a rule of thumb, you should buy the same amount of accidental death insurance coverage as you have in life insurance coverage.  For example, if you have $100,000 in life insurance coverage, you should also purchase $100,000 in AD&D coverage.  The reason for this is that your life insurance coverage was determined based on the needs of the surviving family members.  So, whether you die of natural causes or from an accident, your family’s needs are the same.

We often see clients who underestimate the amount of life insurance they need, so we encourage clients to work with their agent to determine in detail what their family will need after their passing.

How much accidental death insurance you need will sometimes depend on whether your employer offers accidental death insurance as a company benefit.  In many cases, it is, with very affordable group premiums.  This is especially important for those people who are engaged in dangerous types of work where incidences of serious injuries are higher than the norm.  This includes occupations such as heavy equipment operators, construction workers, and commercial fishermen, among others.  It also makes sense to buy accidental death insurance for those who want bare bones coverage or who cannot afford regular insurance.

 

Getting Accidental Death Insurance

There are several highly-rated insurance companies that offer accidental death insurance. These include Mutual of Omaha, United Home Life, Globe Life, Aflac, Fidelity, Farmers, and many other life insurance companies.

How Do I Get Accidental Death Insurance?

You can get an accidental death insurance policy as a stand-alone policy or it can be added as a rider on a basic life, health or many other types of insurance policies including individual or group policies.

Who sells accidental death insurance?

In some instances, credit unions or credit card companies may also offer accidental death insurance.

Your employer may also offer it as a benefit as part of your overall package.  In this scenario, it can be offered in a number of ways:

  • As a group life insurance supplement. It is automatically included in the group life insurance benefit that your employer has negotiated as part of your benefits package.
  • As a voluntary elective benefit. In other cases, you will be given the opportunity to purchase coverage a separate benefit with premiums paid through a payroll deduction.
  • As travel accident coverage. For companies with employees that do a lot of traveling, the accidental death insurance benefit provides very specific and supplemental coverage.  Usually the employer pays all of the premium in cases such as this.
  • Dependent coverage. Some group plans also provide coverage for an insured’s dependents as well.

Life insurance agents can also help you get accidental death insurance.  Below are two ways to get accidental death insurance

  1. Contact PolicyZip and we’ll help you.
  2. Google, “life insurance agent near me” and see what options show up.

Because there are many variables when it comes to accidental death policies, your best bet is to contact your insurance agent and discuss your unique needs and situation with them.  Together you can come up with the policy amount and specific types of accidental death coverage that best meets your situation.

What is the best accidental death insurance?

The best accidental death insurance is the kind that is inforce when you and your family need it.

There are many great companies that offer accidental death insurance, it’s important you put a policy inforce so it’s there when you’re family needs it.

The Bottom Line…Weighing Pros And Cons of Accidental Death Insurance

Accidental Death Insurance Pros

  • Low premium costs or may be provided free of charge as part of an employee benefit package.
  • Provides added coverage for people who work in high risk jobs.
  • Costs much less than term life insurance.
  • Particularly appealing for younger workers who are statistically more likely to die from an accident than an illness.
  • You do not need to die to collect some or all of the face value of the policy.
  • Works well when purchased in addition to term life insurance and disability insurance.
  • A low-cost way to ease financial stress following certain kinds of death or dismemberment events.
  • A viable alternative when you cannot afford other insurance options.
  • Can purchase a travel rider only.

Accidental Death Insurance Cons

  • Limited in scope for what it covers.
  • You must die from an accident, not an illness.
  • Does not cover many forms of death, including surgery, infections, drug overdoses.
  • Excludes some high-risk activities.
  • Rates may increase for those who are at the most risk for accidents, like the young and seniors.

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