now in the grey area. On one hand,
we don't want to start adding lots of
riders to our term life insurance policy
that cumulatively add a lot of cost.
This cost, by the way, could simply
purchase more core term life protection.
On the other hand, AD&D speaks to us at
such an emotional and base level, that
it's hard to ignore. Let's try to
really understand the Accidental Death
and Dismemberment rider to see if it
works for us.
sound pretty grizzly.
Dismemberment. Accidental Death
doesn't exactly give us warm fuzzy
feelings. Before we analyze if
this is a good use of our life insurance
budget, let's look at the common
parameters of AD&D riders that are sold
in the market.
nutshell, if a person dies from an
accident, the policy usually pays double
the original term life amount. For
example, if you have term life for $500K
and an accidental death occurs, the
policy would pay out $1M. There
should be a gut-check question here of
just how exactly the carrier could pay
out double for an amount that is
definitely short of double the cost.
It's all about
probability and life
insurance. The life insurance
company has reams of data showing how
people have died and the percentages of
those that are accidental can be broken
out separately. If .0004% (40 out
of 100,000) die of accidental death
according to the CDC, they can figure
that into a premium amount with a margin
or profit included. That's a very
small amount or probability. They
can easily charge you an additional
premium with a fairly good margin and
account for this low probability.
wording is usually very specific as to
what qualifies to trigger the benefit.
There's actually a big difference
between "accidental bodily injury" and
death by "accidental means". If
legalspeak and semantics come into play
life insurance world, let's assume
it's usually not in your favor.
That's one issue we have with Riders.
Usually, there a time frame after the
injury that death must occur. This
tends to be from 3 months to 6 months on
average. This means that if you
have an accidental injury that meets the
definition of their AD&D benefit but you
pass away 9 months later, the benefit
would not be paid out.
dismemberment side of things is one of
the few benefits where the insured
received the benefits. The benefit
is usually paid out for loss of sight,
loss of hand(s), or loss of a foot
(feet). Amputation may not be
covered unless medically necessary or as
the result of an injury.
What's our take on AD&D? It
depends on the cost. If the cost
is very low...then maybe. To some
extent, AD&D is a sales tool to address
the macabre thought of dismemberment
and/or accidental death. It's a
mental crutch that helps the prospective
life insurance shopper push such
horrific occurrences back. To some
life insurance companies know
this and are able to offer these riders
at a profit. A less cynical person
might say they are responding to demand
of their customers. Once you have
narrowed down the carrier, plan, and
insurance rate, we would be happy to
look at the particulars of Accidental
Death and Dismemberment to see if it
makes sense for your situation.