The Truth About the Accidental Death Rider

Author: Dick Hartzen

Many years ago, insurers created a new product designed to appeal to prospective buyers. A “double indemnity” rider was made available to the insured. Death from an accident would result in double the face amount being paid. This created a problem that was addressed by a new accidental death rider. Unfortunately, it had problems of its own. Now most insurers have a better solution....

Many years ago, insurers created a new item designed to appeal to prospective buyers. A “double indemnity” rider was made available to the insured. Death from an accident would result in double the face amount being paid. With many insurers, a triple amount was paid if a common carrier (bus, plane, taxi etc.) involved the death of a passenger.

This option was a motivating factor in many sales. There was one negative. Insured’s may have wanted an amount that was more or less than the automatic double coverage given. Another option had to be found. This was accomplished by the creation of a rider that allowed a choice on the dollar amount desired. The rider was called “accidental death benefit.”

Many of the accidental death riders contained a “dismemberment benefit.” An amount was paid if the insured lost his/her limbs or eye sight. The loss usually required severance (not loss of use) of a limb or involved a clinically diagnosed blindness. The benefit was equal to the face amount with a reduced benefit for the loss of one arm or leg.

Problem #1: Many insurers used a requirement for “accidental means” to be the cause of the death. Any premeditated act (skiing, using a ladder) may have been ruled as a proximate cause and void coverage. Many companies used a more liberal definition. They only required that the death be due to an “accident”.

Problem #2: Agents did not consider the actual cost and benefits of this coverage. The usual cost for the accidental death rider is $1.00 per $1,000.00 of insurance. A $100,000.00 rider would cost an additional $100.00 per year. This only paid for an accidental death.

Insurers normally offer a term rider that can be added to a permanent type coverage. At age 34, this rider may cost .65 cents per thousand. $100,000.00 of a term rider would now cost $65.00 per year versus $100.00. A major advantage of this option is that this additional amount would be paid for an accidental death or a natural one. The accidental death rider gave less coverage.

The premium for the term rider may increase in the future, but would give the most coverage for the years that contained the largest income replacement needs. The premium increases are usually not very large. The term rider normally ends at ages 65 or 70. The accidental death rider may be in effect for a lifetime.

If immediate family protection is needed, the term rider is much more beneficial than the accidental death rider.