Why is accidental life insurance so inexpensive?

By Steven Merkel AAA
A:

Accidental life insurance is an inexpensive way of obtaining life insurance coverage for yourself or someone else in your family. These policies typically pay a handsome death benefit to your beneficiary in the untimely event of your death, due strictly to an accident that causes death within a specified period of time. Because accidental death makes up less than 5% of all deaths nationwide, insurance companies know their chance of loss is minimal, thus they can offer inexpensive premiums for this type of policy.

The catch is, they are subject to certain "death criteria." For example, if the death was resultant from public transportation, the death must occur within three months of the accident. Also, your beneficiary will only collect benefits if your death is proven as a direct result of the accident. Some beneficiaries have a difficult time trying to prove this, as death can occur several weeks after an accident and for various reasons other than the accident itself, such as medical complications or surgical procedure risks. Unfortunately, it is the beneficiary's responsibility to prove this, which makes accidental death life policies a riskier product when compared to the traditional life insurance policy.

Remember, insurance companies have fancy lawyers, deep pockets and lots of time. If the accident is questionable, you can bet they'll try to fight the death benefit payout. Before you purchase an accidental death insurance policy, compare rates with a traditional term life insurance policy. Even if the premiums are slightly higher with traditional terms, you and your family will have a better piece of mind. (Learn what types of policies you should avoid, read 15 Insurance Policies You Don't Need.)

This question was answered by Steven Merkel

RELATED FAQS

  1. What is the difference between ex-ante moral hazard and ex-post moral hazard?

    Learn what moral hazard is, the difference between ex-ante moral hazard and ex-post moral hazard and the behavioral changes ...
  2. What happened to Bernard Baruch's estate after his death?

    Learn what became of financier Bernard Baruch's multimillion dollar estate upon his death in 1965, and learn about his philanthropic ...
  3. What are the differences between a revocable trust and a will?

    Investigate the choice between a revocable trust and a traditional will and how their unique advantages can match asset management ...
  4. What is expected to happen to Rupert Murdoch's empire after his death?

    Join in on the speculation over what the future might hold for Rupert Murdoch's media empire when he dies, and learn about ...
RELATED TERMS
  1. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  2. Cestui Que Vie

    The individual who is the beneficiary of a trust or insurance ...
  3. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  4. Guideline Premium And Corridor Test (GPT)

    A test used to determine whether an insurance product can be ...
  5. Cash Value Accumulation Test (CVAT)

    A test method used to determine whether a financial product can ...
  6. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...

You May Also Like

Related Articles
  1. Entrepreneurship

    Want To Sell Life Insurance? Read This ...

  2. Stock Analysis

    Genworth Looking At A Lot Of Heavy Lifting

  3. Stock Analysis

    Even Near A 52-Week High, MetLife Seems ...

  4. Stock Analysis

    Ace Limited Sees Growth In Asia And ...

  5. Stock Analysis

    The Annuity Gorilla In The Room

Trading Center