Next time you open a credit card statement and a brochure advertising ‘accidental death policies’ falls out, is it worth picking up? Or continuing its journey to the (recycle) bin?  

Accidents only account for 23% of deaths for 50-year-old males, yet many people choose them because of the lower premium. But while they are somewhat cheaper, they are not 77% cheaper (if you look at the face value of that statistic). And curiously, older males — who have less chance of dying accidentally than young males — get to pay the same premium for the same amount of cover.

Hmmm.

On top of that, there’s this: if you replace an accidental death policy with a standard policy, you can end up paying a premium loading for certain conditions (such as asthma). 

Then consider this: a male over 45 years of age who dies has only a 1 in 4 chance that their beneficiaries will collect on an accidental death policy. That’s a pretty grim statistic.

All those facts make the initially cheaper-looking accidental death policy actually more expensive.

There are financial and emotional penalties to consider here: right when your family may need the financial help of a payout from the policy, it may not materialise. Plus, it’s added stress they certainly do not need at that time.

The fine print

As always, you must read the fine print.

Usually, accidental death policies have:

• exclusions for deaths related directly or indirectly to drugs and/or alcohol (think car accidents)
• defined times in which death must occur from the accident to qualify for a payout (such as time on life support — and you do not want to be forced to include the policy’s requirements in any of your thinking here)
• exclusions to pay claims for death from suicide

These conditions are not in standard policies that cover “death from all causes”.

So before you think “hey that’s cheap, I can save here” when you read a brochure sent by your bank, you need to think it through entirely.

Sometimes, having an accidental death policy is a bit like having some boxes stapled together to look like a computer — they just won’t do the same job.

If you would like to discuss your insurances, and whether they fit your lifestyle and financial needs, contact us — even if it’s outside of your scheduled planning meeting.

Source: The Risk Store

Tags: accidental death, Insurance