November 28, 2022

Business Update Blog

Accidental Death Insurance On Top Of Life Insurance: Coverage Differences

Recently, I got an upsell from my life insurance carrier offering $500,000 in accidental death insurance for $33 a month. This is on top of my existing 20-year term life insurance policy coverage of $750,000.

It sounded like repetitive coverage. But I was interested in learning more since I actually wanted to get at least a $1 million term life insurance policy until my kids are adults, but couldn’t. $750,000 was the most SBLI was willing to cover without a medical exam. And I didn’t want to draw blood.

If I got an accidental death insurance policy, I would then have $1,250,000 in total coverage for accidental death. This is different from receiving $1,250,000 in total life insurance coverage.

Is accidental death insurance necessary on top of regular life insurance coverage? I had to investigate further and understand the difference.

What Is Accidental Death Insurance?

Accidental death insurance, also called accidental death and dismemberment insurance (AD&D), covers death from accidents. But it doesn’t cover death from natural causes like old age or illness.

AD&D insurance also pays out part of the benefit in some instances of injury or accidental loss of limbs, hence the word dismemberment.

To clarify the differences in what life insurance and accidental death insurance covers, here’s a great chart from PolicyGenius comparing the two.

Life Insurance Versus Accidental Death & Dismemberment Coverage Comparison

Life Insurance Versus Accidental Death & Dismemberment Coverage Comparison

The premiums are based off a 35-year-old non-smoking male with a Preferred health rating buying a $500,000, 20-year term life insurance policy based on a composite of policies offered by Policygenius.

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What Accidental Death Insurance Won’t Pay For

As you can see from the comparison chart, accidental death and dismemberment insurance won’t pay out for:

  • Death by natural causes, sickness, or disease
  • Death by drug overdose
  • Or death by suicide

I’m surprised the chart says term life insurance will pay out for death by suicide though. You had better double check with your life insurance carrier before doing anything you regret.

What Accidental Death Insurance Will Pay For

The only types of death in which an accidental death insurance policy will pay out are:

  • Death by accident (car crash, plane crash, boat crash, etc)
  • Death by murder
  • Loss of limb, sight, hearing, or speech

Insurance That Covers The Types Of Death You’re Most Afraid Of

Upon comparing the two types of insurance policies, it seems the types of deaths accidental death insurance covers are probably the ones many of us fear most.

My biggest death-related concern is dying suddenly in an airplane or car crash, where there is no chance of survival. Before every family road trip, I inspect the car and stock up on some caffeinated drinks so I don’t nod off. And before every takeoff, I make sure to call and text my loved ones just in case.

I’m not concerned with getting murdered because I live in a relatively safe place. Further, I don’t piss people off, don’t look rich, and know self defense. But it’s nice to know that accidental death insurance will pay out if this were to happen.

I don’t plan to commit suicide or die by drug overdose, so I’m not afraid of these types of deaths. Therefore, accidental life insurance not covering these two items is no big deal.

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Finally, dying by natural causes is the most pleasant way to die. Getting sick or contracting a disease is terrible but a part of life. Thanks to modern medicine, there’s always some chance of surviving an illness or at least prolonging life. Therefore, I’m not as concerned as accidental death insurance doesn’t cover these types of deaths.

It’s really the unexpected and sudden types of deaths I worry most about, which is why accidental death insurance is attractive. If you are a planner, you likely feel the same way.

Is Accidental Death Insurance On Top Of Life Insurance Worth It?

Based on the types of deaths I fear most, I’m leaning towards getting an accidental death insurance policy as well. There’s always hope of recovering from a grave illness. But when a death is by accident, that’s it.

My ideal life insurance coverage was short by $250,000. Therefore, getting an accidental death insurance policy for $250,000 would top me up to $1 million in accidental death coverage. The cost will be less than $20 a month and I can cancel it at any time. Or I can just pay $33 a month for the full $500,000 offer.

I like how being pre-approved means there are no medical exams, no health questions, and no hassles. Having life insurance until both my kids turn 20 feels good to me. And if I don’t feel the need to have the coverage anymore, I can just cancel.

Downsides To Accidental Death Insurance

There may be one downside to getting accidental death insurance other than paying more premiums. The insurance carrier might contest the legitimacy of an accidental death in order to not pay out.

In other words, some people might try to fake an accidental death when it was actually a suicide. These incidents are probably very rare, but they may make collecting the payout slightly more difficult for legitimate cases.

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There’s Always A Solution To Your Life Insurance Needs

What I realized on my path to insuring my family is there’s always a solution to getting what you need.

I didn’t think I could get affordable coverage 10 years after getting my first policy due to a sleep apnea diagnosis. But I checked online and found SBLI that was willing to cover me at an affordable rate.

As I didn’t want to do a medical exam, I agreed to its limit of $750,000 instead of $1 million. $750,000 was better than nothing as my $1 million, 10-year term policy was expiring.

Then for six months I thought I was stuck with a $750,000 life insurance policy until I got this pre-approved accidental death insurance offer.

This is an example of how capitalism can be beneficial. SBLI probably has some internal metric that says if I pay my life insurance premiums on time for six months in a row, they will send me a new offer. And I can accept or decline based on my needs.

If you find yourself dissatisfied with your life insurance coverage or any type of coverage, keep searching. More likely than not there is a company out there willing to provide what you need at a reasonable price.

Readers, anybody have accidental life insurance coverage on top of their regular life insurance? Anybody have only accidental life insurance coverage? I’d love your input before proceeding. What’s the downside besides paying a higher monthly premium?

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