Comparing Term Life
Insurance with Accidental Death Insurance
Term life pays out a death benefit whether a death is due to an accident or natural causes.
Whereas, Accidental death insurance plans pay out only if a death is accidental.
You may think your life insurance needs are covered by an accidental death policy, but that’s not always the case.
Term life and accidental death are two very different types of life insurance policies.
Term life insurance will pay out a death benefit for any of the following:
*Yes, if the death occurs after the end of the suicide clause, which is usually two years after starting your life insurance policy.
Accidental death insurance will pay out a death benefit for any of the following reasons:
Death from an accident, like a car accident or plane crash.
Accidental death insurance does not pay out for the following reasons:
Term Life Insurance
Term life insurance is basic coverage that pays out if you die within a specific time period, regardless of cause of death.
It will pay out whether you die of an illness, accident or other causes. The only exception is suicide, which is usually not covered within the first two years of owning the policy.
If you want to ensure your family gets a life insurance payout if you die, choose life insurance, not accidental death insurance.
With term life insurance, you choose the amount of coverage and the policy length.
Term lengths range from 10 to 30 years. If you die after the term ends, there’s no payout because the policy has expired.
You can renew or purchase a new policy at the end of your term, but your life insurance rates will be higher than before because you’ll be older – and they’ll be even higher if you’ve developed any new medical conditions, such as high blood pressure or diabetes.
Accidental Death Insurance
Accidental death insurance may be purchased at work, as a stand-alone product or as a rider on a life insurance policy.
Unlike term life insurance, accidental death insurance policies pay out only if you are killed in an accident.
Limitations of Accidental Death Insurance
Although accidental death coverage may seem like a good idea, it may not be worth the money considering the chances of dying from an accident.
The chances of dying from an illness are greater than the chances of dying from an accident.
Among the leading causes of death, accidents are Number 4, after heart disease, cancer and chronic lower-respiratory diseases, according to 2015 data from the Centers for Disease Control and Prevention.
And, if you die from an accident, but not right away (within 3 months), your beneficiaries might not see any benefits.
To collect on an accidental death policy, it must be proved that a death was directly caused by the accident or occurred within a certain time-frame after the accident, usually three months.
Accidental death policies often exclude deaths due to high-risk activities such as skydiving or car racing. And deaths caused by a drug overdose, drunken or drug-impaired driving by the insured person, war, complications from surgery, mental illness, suicide and certain other circumstances likely won’t be covered.
Therefore, if your goal is to provide your family with a financial safety net if you die, life insurance is the right purchase. Accidental death coverage could be a good supplemental policy if you already own life insurance, especially if you can get accidental death coverage free through your employer-provided group benefits plan.
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