An accidental death clause is a provision you can add onto life insurance policies to ensure your beneficiaries receive a death benefit in excess of the original amount, should your demise come about due to a covered accident, instead of natural causes. The conditions of each policy, in terms of restrictions on which accidents are covered, the policyholder's age, and more, vary across providers. Before purchasing this extra feature, it's important to assess your risk levels and decide whether you would want to pay an additional premium for it. Understanding the circumstances that may render an accidental death claim invalid is also worthwhile as is being aware of any fine print in such clauses.
Are Accidental Death Clauses Worth It?
As with any addenda to life insurance policies that exist for the benefit of the policyholder, accidental death clauses come with an additional cost. Much like return of premium riders, it increases the cost of monthly premiums by a percentage of the total coverage. The extent of the price hike also depends on whether your beneficiaries would receive double or triple indemnity following a valid claim.
So the question is whether an accidental death clause is worth the extra cost. Statistical evaluation has shown that an average of 5 in every 100 deaths occur accidentally, which is not a large percentage at all. What's more, not all accidental deaths qualify for an accidental death claim in this context. Therefore, only a small fraction of the population could benefit. However, you should also consider whether you lifestyle increases the probability of you dying due to an accident.
Persons who have hazardous professions, such as construction, mining, and so on, are especially prone to die in an accident. Other important variables are the amount of time an individual spends driving a motor vehicle or using any implement likely to cause death by accident. If any of these cases are applicable to you, then getting a life insurance policy with an accidental death clause may be worth it.
When Can Double or Triple Indemnity Be Claimed?
Paying premiums for an insurance policy with an accidental death clause can be quite expensive, so it would be a waste if you are unsure about the circumstances under which a claim can be made. For starters, the death of the policyholder need not happen instantly due to an accident. In the fine print of many accidental death clauses, the term "proximate cause" is used. Insurance companies usually set a threshold of around 1 to 2 years. It must only be determined by a physician that the proximate cause of the policyholder's death was the accident itself and not some intervening event. This fact must be stated in the policyholder's death certificate, which the beneficiaries would present to the insurance company upon claiming indemnity.
For example, in a landmark insurance case, a city sewer worker sustained lesions in his outer thigh as a result of an accident. He immediately sought treatment and was released from the hospital. Knowing fully that his wounds were not yet completely healed, he went back to work in the sewers. As a result, the lesions on his thigh became infected, and he died to multiple organ failure thereafter. It was determined that though the cause of the lesions was the accident, the policyholder’s neglect in choosing to work, despite his wounds not yet being fully healed, was the proximate cause of his death. Thus, his beneficiaries are not entitled to double or triple indemnity as stipulated in the accidental death clause.
Other exclusions include acts of suicide or hobbies that involve you intentionally exposing yourself to the risk of dying by accident. The latter includes drag racing, sky diving and similar hazardous acts that increase the risk of death by accident.
Marketing of Accidental Death Clauses: Be Wary
Over the past half-decade, accidental life insurance policies have become significantly cheaper due to the aggressive marketing strategies used by many companies. Moreover, some insurance companies have already stopped offering life insurance policies without accidental death clauses. This increases their revenue due to higher premiums. In addition, not all insurance companies make an effort to educate the beneficiaries of life insurance policyholders on how to make claims. As such, many indemnity payouts are left unclaimed or even neglected due to the ignorance of the beneficiaries.
In choosing your insurance company, it is important to determine whether the company actively keeps the beneficiaries of your insurance policy informed in the event of your demise. Reputable insurance companies are usually proactive in ascertaining the facts surrounding cases of accidental deaths and informing the beneficiaries of the indemnity they are entitled to.