What is an accidental death benefit?
The accidental death benefit is a payment due to the beneficiary of an accidental death insurance policy, which is often a clause or an endorsement linked to a life insurance policy. The accidental death benefit is generally an amount paid in addition to the lump sum payment payable if the insured dies from natural causes.
Depending on the policy issuer, the accidental death benefit can extend up to one year after the initial accident, as long as the accident resulted in the death of the insured.
Understanding accidental death benefits
Accidental death, as defined in accidental death insurance policies, is any death strictly due to an accident. It generally excludes elements such as acts of war and deaths caused by illegal activities, etc. Any dangerous pastime in which the insured regularly engages is generally also specifically excluded. In the case of a fatal accident, death must generally occur within a time specified in the policy.
An accidental death benefit generally covers any death that occurs due to an accident.
People working in or around potentially hazardous environments or who drive more than the average (either professionally or as a commuter) should consider accidental death endorsements. They can be used to reinforce the benefits paid to beneficiaries. These endorsements generally end when the insured person reaches 70 years of age.
Four common benefit plans in the event of accidental death
- Supplement for collective life. In this type of arrangement, the accidental death benefit plan is included as part of a group life insurance contract, and the amount of the benefit is generally the same as that of the group life guarantee.
- Voluntary. The accidental death benefit plan is offered to group members as a separate optional benefit. For this type, premiums are generally paid in the form of payroll deductions.
- Travel accident (for example, business trip). The accidental death benefit plan under this arrangement is provided through an employee benefit plan and provides additional accident protection to workers while on business travel (employer pays generally the entire premium).
- Dependents. Some group accidental death benefit plans also cover dependents.
Key points to remember
- Accidental death insurance is included in an accidental death insurance policy.
- Accidental death benefits are intended to cover death due to accidents.
- Some jobs and workers in hazardous environments should consider an accidental death endorsement.
How Accidental Death Benefits Work
As a hypothetical example, suppose Derrick has a $ 500,000 life insurance policy with a million dollar accidental death endorsement. If Derrick dies of a heart attack (a natural cause), his beneficiary will receive $ 500,000. If he dies from a car accident, his beneficiary will receive the life insurance benefit of $ 500,000 plus the accidental death benefit of $ 1 million for a total payment of $ 1.5 million.