ACCIDENTAL DEATH OR ACCIDENTAL DEATH AND DISMEMBERMENT?
The essential issue about accident insurance is, would your family really need more to survive if you bite it
accidentally coming home from work than if you died after five years on a reduced disability income,
consuming a large part of your savings to readjust your lifestyle? Obviously not.
This means accident insurance is not a substitute for life insurance. It's often a throw in with group
insurance contracts or credit card companies. That's because it's cheap. It's cheap because the incidence
of claims is much lower than for life insurance. However sometimes it makes sense.
There are two basic types. One is Accidental Death insurance. This is the one people often confuse with
life insurance. They think they could only die as a result of an accident as they are too young to die of an
illness. And therefore it must be as good as. This is very wrong and it’s why accident insurance is
promoted so heavily. It is of little value since the likelihood of a claim is not high.
Accidental Death and Dismemberment insurance, however, does have some value. In addition to a death
benefit, it also pays portions of that death benefit (the principal amount) when various non-death-causing
accidents happen to you. For example, loss of a hand and foot, loss of sight of one eye, loss of hearing,
etc. This can help with the readjustment after a disastrous accident.
Just as accidental death insurance is not a substitute for life insurance, dismemberment insurance is not a
substitute for disability insurance or critical illness insurance. However, like disability and critical illness
insurance, there are a lot of fine points in the wordings of different plans which you should note in choosing
the right policy for you. For example, do you have to lose a limb in order to collect, or just lose the use of
the limb? Or eye? Or ear? What about fingers and toes? How far does dismemberment go; just limbs
and extremities, or would it cover the accidental rupturing of internal organs? Can the benefits be extended
to other family members? Is it 24 hour coverage, worldwide, or restricted?
People who have a lot of exposure to potential accidents, such as highway commuters or vigorous outdoor
types, would do well to have an A D & D policy. It also makes sense for parents of children at school and
college, when the children are too young to get their own disability insurance but, for example, are subject
to major sports injuries. Often accident insurance can be extended to cover family members other than the
breadwinner, although usually in smaller amounts.
Group A D & D policies vary in quality as much as individual policies. However there is not much you can
do about it since it usually comes with the pay package. But look at it and see if your needs require
upgrades. The upgrades can be purchased either individually from a life insurance broker or through credit
card companies. Usually adding it to a life insurance policy as "double indemnity" is unsatisfactory as
these riders often are quite restrictive, although there are some companies that have good A D & D riders.
However you choose to upgrade your accidental death and dismemberment coverage, it is important that
you be sure that the needs you have identified are being met by the contractual wordings of the plan you
. . . Provided as a service to the clients and associates of . . .
STEPHEN B H SMITH, BA, CEB, CFP, CSC, PRP
YORKMINSTER INSURANCE BROKERS LIMITED
105 Dorset Street West
Port Hope, Ontario, L1A 1G4.
Telephone: (905) 885-4977 Toll free: 1-800-668-1751
Facsimile: (905) 885-2556 Mobile: (905) 373-5670