What Is an Accidental Death Benefit?
The term accidental death benefit refers to a payment due to the beneficiary of an accidental death insurance policy, which is often a clause or rider connected to a life insurance policy. The accidental death benefit is usually paid in addition to the standard benefit payable if the insured died of natural causes.
Depending on the policy's issuer, an accidental death benefit may extend up to a year after the initial accident occurs, provided the accident led to the insured's death.
- An accidental death benefit is paid to the beneficiary of an accidental death insurance policy.
- Accidental death benefit riders often end at a specific age, as set by the insurance company.
- Accident death benefits often have strict perimeters of what constitutes an accidental death.
- Accidental death benefits are optional riders, so they aren't included in standard life insurance policies.
- Certain jobs and workers in dangerous environments should consider an accidental death benefit rider.
Understanding Accidental Death Benefits
Accidental death benefits are riders or provisions that may be added to basic life insurance policies at the request of the insured party. Some people choose to add accidental death benefit riders to their policies to protect their beneficiaries if an accident ever occurs. This is important as accidents are hard to predict and can leave family members in a bind when sudden death occurs.
These death benefits are even more important for people who work in or around potentially hazardous environments. Even those who drive more than average—either professionally or as a commuter—should consider accidental death benefit riders.
As an optional feature, the insured party must pay an additional fee on top of their regular premiums to purchase this benefit. Although it may come at an additional cost, the accidental death benefit increases the payout to a policy's beneficiary. This means that the beneficiary receives the death benefit paid by the policy itself plus any additional accidental death benefit covered by the rider. These riders typically end once the insured person reaches age 70.
What Is Considered Accidental Death?
Insurance companies define accidental death as an event that strictly occurs as a result of an accident. Deaths from car crashes, slips, choking, drowning, machinery, and any other situations that can't be controlled are deemed accidental. In the case of a fatal accident, death usually must occur within a period specified in the policy.
Some policies' accidental death benefits may also cover dismemberment—total or partial loss of limbs—burns, instances of paralysis, and other similar cases. These riders are called accidental death and dismemberment (AD&D) insurance.
Accidents typically exclude things like acts of war and death caused by illegal activities. Death from an illness is also excluded. Any hazardous hobbies that the insured regularly engages in—race car driving, bungee jumping, or any other similar activity—are specifically excluded as well.
Insurance companies won't cover accidental death that results from hazardous hobbies that the insured regularly engages in such as race car driving or bungee jumping.
Types of Accidental Death Benefit Plans
Group Life Supplement
In this type of arrangement, the accidental death benefit plan is included as part of a group life insurance contract, such as those offered by your employer. The benefit amount is usually the same as that of the group life benefit.
This accidental death benefit plan is offered to members of a group as a separate, elective benefit. Offered by your employer, premiums are your responsibility. You generally pay these premiums through regular payroll deductions. Employees are covered for accidents that occur while on the job. Policies pay out benefits for voluntary accident insurance even if the insured party isn't at work.
The accidental death benefit plan in this arrangement is provided through an employee benefit plan and provides supplemental accident protection to workers while they are traveling on company business. Unlike voluntary accident insurance, the employer usually pays the entire premium for this coverage.
Some group accidental death benefit plans also provide coverage for dependents. If you have a spouse or partner, or children who depend on your salary to pay bills and other costs, it may be a good idea to enroll in an accidental death benefit. This additional insurance could help them out by providing money to pay bills, pay off a mortgage, or provide money to your children for future events, like college. In addition, if you co-own a business, your business partner could be listed on your insurance policy to cover any outstanding debts, in the event of your death.
Example of Accidental Death Benefit
As a hypothetical example, assume Chris has a $500,000 life insurance policy with a $1 million accidental death benefit rider. If Chris dies due to a heart attack—a natural cause—the insurance company will pay their beneficiary $500,000. If they die as a result of a car accident, their beneficiary will receive the $500,000 life insurance benefit plus the $1 million accidental death benefit for a total payout of $1.5 million.
What Is Considered Accidental Death for Insurance Purposes?
Insurance companies consider accidental death to be an event that causes your death as the result of an accident. For example, most car crashes, falls down the stairs, machinery, choking, and even drowning are circumstances beyond your control, and thus counted as accidental.
What Is Accidental Death and Dismemberment Insurance?
Accidental death and dismemberment insurance covers you in the case of accidental death, or if you lose a limb (or other significant injuries) in an accident that causes you to stop working. Besides being dismembered, the insurance may include, workplace injuries, injuries caused by a fire or flood, accidents with firearms, or a serious fall.
Are Accidental Death and Dismemberment Insurance and Accidental Death and Disability Insurance the Same Thing?
Both accidental death (AD&D) and dismemberment and accidental death benefit (ADB) policies pay a benefit. However, an Apay out in the case of accidents. The main difference is that an AD&D policy will pay if the insured is dismembered or injured, and an ADB is only paid to beneficiaries if the account holder dies in an accident.