Does it pay to add accidental death benefit?

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PostPosted: Fri May 15, 2009 7:54 am   Post subject: Does it pay to add accidental death benefit?  

Does it pay to add accidental death benefit to the life policy? Would death in a road rage be considered for accidental death benefits?


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PostPosted: Fri May 15, 2009 10:33 am   Post subject:   

Joe and Sam are identical twins. Everything about them is the same. On June 12th, 2009, they are both going to die. Joe is driving down the street and has a heart attack and drives off of a cliff and dies. 5 minutes later, Sam is pushed off the cliff by another driver in an act of road rage.



Does Sam's family need more more than Joe's family? They need the same amount. Therefore, don't buy AD&D. Get a policy that will pay the needed amount regardless of cause of death.

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PostPosted: Fri May 15, 2009 10:48 am   Post subject:   

Quote:
Does it pay to add accidental death benefit to the life policy?


Interesting question.



Of course adding accidental death pays as long as the insured dies within 90 days of the accident. Generally, and no doubt STATE SPECIFIC, if you die after 90 days the policy doesn't pay. Please NO HATE mail until after you read the exclusions in your own policy.



I've personally always felt adding accidental death benefit was rather odd.



If a person NEEDED $500,000 of life insurance you wouldn't buy a $250,000 life policy then add $250,000 accidental death and hope you die by accident so your family would have enough.



The reverse is equally absurd, if you needed $500,000 of coverage and bought a $500,000 policy why would you then ADD accidental death to the policy so the beneficiary is paid $1,000,000 because you died by accident.



Accidental death benefit is very inexpensive to add to life policies but personally as an agent I've always felt this was rather odd.



I'm not saying this is right or wrong, just odd.



Also, I'm just throwing my 2 cents in the ring as this is something I think many agents have struggled with and the above represents how I handle this.


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PostPosted: Sat May 16, 2009 12:46 am   Post subject:   

Don't some life policys just automatically come with accidental death or double indem.?



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PostPosted: Sat May 16, 2009 2:16 am   Post subject:   

I believe something like less than 1% of all life insurance claims would actually pay anything if the insured had an accidental death benefit. It's really a waste of money and the insured would probably be better off just adding a little more coverage paid in any type of death than hoping for it to be accidental and still qualify as an accident under the insurance company's definition of such.

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PostPosted: Sat May 16, 2009 6:52 am   Post subject:   

Hi GarySpicuzza,

I agree with your given comment. It's very informative as well as recommendable. I think health life insurance would be the better choice.



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PostPosted: Sat May 16, 2009 9:16 am   Post subject:   

Adding accidental death benefit to the life policy would make more sense to people who are involved in hazardous jobs.



The advantage is that you would be covered for double the amount of the life plan when just paying half for it. As Gary has mentioned, ADB riders are inexpensive, so it wouldn't alter your rates much.



Anyway, whether or not buying accidental death benefit rider is worthy would depend upon the situation and choice of the insured.

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PostPosted: Sat May 16, 2009 1:40 pm   Post subject:   

Quote:
Adding accidental death benefit to the life policy would make more sense to people who are involved in hazardous jobs.




Nope. It still doesn't make sense. If your family needs extra coverage, they still need it if you drop dead of a heart attack.
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PostPosted: Sat May 16, 2009 4:09 pm   Post subject:   

Quote:
I've personally always felt adding accidental death benefit was rather odd.






Just thought I would share a few interesting statistics:



Mortality



All unintentional injury deaths

Number of deaths: 117,809

Deaths per 100,000 population: 39.7

Cause of death rank: 5



Motor vehicle traffic deaths

Number of deaths: 43,667

Deaths per 100,000 population: 14.7



Unintentional poisoning deaths

Number of deaths: 23,618

Deaths per 100,000 population: 8.0



Unintentional fall deaths

Number of deaths: 19,656

Deaths per 100,000 population: 6.6



Source: Centers for Disease Control & Prevention, Deaths: Final Data for 2005, Tables B, 18



In 2005, there were 2,448,017 reported resident deaths in the United States. The 5th leading cause of death was Accidents (unintentional injuries).



Insurance data and mortality tables tell us that the average life expectancy is about age 78. So, it just makes sense that if a person dies before the age of 78, there is a high probability that the death will be the result of an accident.



As previously mentioned, the accidental death benefit if very inexpensive and I personally believe that it is a wise decision to add it.



I will relate a personal story: My 16-year-old nephew was involved in an auto accident and was transported by life flight helicopter to the hospital, some 40 miles from the scene. The cost of the air ambulance alone was in excess of $25,000. He was maintained on life support for approximately two weeks in a critical care unit. The decision was finally made to disconnect the life support and he died, leaving a hospital bill in excess of $700,000. Then there was the cost of the funeral service and burial.

He was covered under a health insurance policy that had a "lifetime maximum" of $500,000, so the balance of all the expenses that my brother was left to pay was approximately $250,000.



We should buy life insurance in the amount needed to carry out our financial plans at death, but the small amount of premium required to add the accidental death benefit could possibly prevent a financial disaster.



Not really "odd" to me.



Maze



P.S. Would someone delete the "Guest" post, thanks.


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PostPosted: Sat May 16, 2009 9:05 pm   Post subject:   

Quote:
Insurance data and mortality tables tell us that the average life expectancy is about age 78. So, it just makes sense that if a person dies before the age of 78, there is a high probability that the death will be the result of an accident.




Nope. Let's use your numbers.



Life expectancy is the age at which half of the population should still be alive. In other words, if life expectancy is 78, half of the people will die before age 78 and half will die after 78.



I'll give you the benefit of the doubt and assume that 100% of accidental deaths happened to people under the age of 78. This is 117,000 deaths. Because there were 2.4 million deaths, 1.2 million of them would have occured before age 78. This means that 10% of all deaths for people under the age of 78 were due to accident. In other words, there is actually a greater than 90% chance that a death before age 78 is not due to an accident.



I am very sorry to hear about the tragic loss of your nephew.



If he would have had a heart attack instead or if it was an intentional suicidal act, and the hospital bills were the same, the family would have needed just as much coverage and ADD wouldn't have paid a dime.



We don't know how death will occurs. Therefore, get insurance that will pay regardless of how death occurs.
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PostPosted: Sat May 16, 2009 11:02 pm   Post subject:   

Don't forget that all of those deaths listed in statistics as "accidental" do not necessarily qualify under the insurance company's definition of it.

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PostPosted: Sun May 17, 2009 3:11 pm   Post subject:   

Quote:
I'll give you the benefit of the doubt and assume that 100% of accidental deaths happened to people under the age of 78. This is 117,000 deaths. Because there were 2.4 million deaths, 1.2 million of them would have occured before age 78. This means that 10% of all deaths for people under the age of 78 were due to accident. In other words, there is actually a greater than 90% chance that a death before age 78 is not due to an accident.




Sorry, but your reasoning is just a little flawed, so let me see if I can make this just a little clearer.



I am not an actuary, but my understanding of mortality tables is that they represent statistics showing the percentage of persons who will die at any given age or the probability that someone will be alive at a certain age. I try just to keep it simple.



The 2001 CSO Mortality Table shows that the life expectancy of a male age 35 is 42.08 years and a female of the same age is expected to live 45.78 years. I have simply rounded things off and view our life expectancy to be age 78.



The original question was whether or not it is a good idea to purchase the Accidental Death Benefit when buying life insurance. That decision, of course, is a personal decision to be made by the insurance applicant and everyone should understand some facts.



Here is a breakdown of deaths in the U. S. by cause of death and number of deaths, according to the U. S. Census Bureau, Statistical Abstract, 1999:



Motor Vehicle - 43,649

Falls - 14,986

Poisoning - 9,510

Fires - 3,741

Drowning - 3,488

Inhalation/Ingestion - 3,206

Complications of medical procedures - 2,929

Firearms - 1,134



The report went on to say that every year there is one drowning of a child for every 11,000 residental swimming pools and one child killed by a gun for every 1 million guns.



The CDC's 2004 report breaks down accidental deaths by age group and shows the percentage of all deaths in each age group which were the result of accidental death:



Ages 1-4 - 34.3%

Ages 5-9 - 39.0%

Ages 10-14 - 39.0%

Ages 15-19 - 49.8%

Ages 20-24 - 43.7%

Ages 25-34 - 31.9%

Ages 35-44 - 19.3%

Ages 45-54 - 9.5%

Ages 55-64 - 2.5%



Even though accidental deaths account for 5% of all deaths in the U. S., the leading cause of death prior to age 35 is unintentional accidents. It just can't get any clearer.



Quote:
If he would have had a heart attack instead or if it was an intentional suicidal act, and the hospital bills were the same, the family would have needed just as much coverage and ADD wouldn't have paid a dime.




I have absolutely no idea what the purpose of this comment was, but I would advise you to be very careful about the "heart attack". This one topic could cover several pages, but I will try to keep it brief. There are circumstances in which a "heart attack" can be attributed to an accident. One example would be trauma associated with an auto accident, another could be complications from a medical procedure. This will give you something to research. There have been court battles over this one. The point I was trying to make is that if the family had purchased the accidental death benefit, the proceeds would have been at least doubled.



Quote:
We don't know how death will occurs. Therefore, get insurance that will pay regardless of how death occurs.




I agree with you here, but for the small amount of additional premium to add double or triple indemnity to a life insurance policy, a person or couple with a family would be wise to consider adding this benefit to their policy.


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PostPosted: Sun May 17, 2009 5:09 pm   Post subject:   

Quote:
Even though accidental deaths account for 5% of all deaths in the U. S., the leading cause of death prior to age 35 is unintentional accidents. It just can't get any clearer.




It's irrelevant if it is the leading cause of death. "Accidents" being the leading cause of death compares accidents to heart attacks and compares it to cancer and compares it to the flu and compares it to suicide and compares it every other thing that can kill a person. Instead, "accidental death" needs to be compared to the sum total of death at all ages. Additionally, only accidents in which one would be able to claim the accidental death benefit counts.



At all ages, a death is more likely to occur for a reason other than a accident.



Quote:
I am not an actuary,




Neither am I. Put on your actuary hat for a minute. The insurance companies need to make money. Why would accidental death be inexpensive? There's only one answer. They don't have to pay many claims. It's very cheap and yet it's still a money maker for the insurance company.



I
Quote:
have absolutely no idea what the purpose of this comment was, but I would advise you to be very careful about the "heart attack". This one topic could cover several pages, but I will try to keep it brief. There are circumstances in which a "heart attack" can be attributed to an accident. One example would be trauma associated with an auto accident, another could be complications from a medical procedure. This will give you something to research. There have been court battles over this one. The point I was trying to make is that if the family had purchased the accidental death benefit, the proceeds would have been at least doubled.




The purpose was simply that we can't predict death. Yes, a "heart attack" can be attributed to an accident, but so what? Most heart attacks are not attributed to an accident. Who would ever want to have a court battle to see if a death claim will be paid? Why be put in that position? Instead of needing to get double proceeds, make sure that the family gets what they need.



Quote:
I agree with you here, but for the small amount of additional premium to add double or triple indemnity to a life insurance policy, a person or couple with a family would be wise to consider adding this benefit to their policy.




Why pay money to get a windfall that this is more than what is needed? This advice is equivalent to recommending that someone plays the lottery because it is only a few dollars every week.
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PostPosted: Mon May 18, 2009 8:40 am   Post subject:   

Without interrupting the debate that's been on between Maze and Expert, I'd like to know bit more from Goldenz about the statement he made.



Quote:
Don't forget that all of those deaths listed in statistics as "accidental" do not necessarily qualify under the insurance company's definition of it.




How do they differ?
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PostPosted: Mon May 18, 2009 8:46 am   Post subject:   

I think buying accidental death benefit make sense for someone who with some certainties knows that he would die in an accident, may be a racer or a biker. What do you say guyz? Very Happy


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