Every time you turn on the news you hear about people dying in accidents. So itâ€™s no wonder that many of us buy accidental death insurance, either as a standalone policy, or as a rider on an existing policy. The insurance is designed to provide for your family should you be killed in a mishap, such as a car crash or fall.
Thereâ€™s only one problem with accidental death insurance, says Lorne Marr, president of LSM Insurance in Markham, Ont. â€œIt doesnâ€™t make any sense.â€ Accidental deaths are rare, accounting for only about 5% of mortality. But accidental death insurance often costs more than a term life policy that would cover you no matter how you die.
â€œAside from the coverage offering poor value,â€ says Marr, an independent insurance broker with 14 years of experience, â€œthe biggest reason I wouldnâ€™t buy it is because my family doesnâ€™t need more money just because I happen to die in an accident.â€ In fact, your familyâ€™s costs would likely be higher if you were to die from cancer or some other disease, which is a much more common cause of death than accidents.
Anne Kleffner, associate professor of risk management and insurance at the University of Calgary, agrees that accidental death insurance makes no sense. â€œIf youâ€™ve bought the right amount of life insurance to begin with, it seems a bit silly to then spend more money for coverage you can only use if thereâ€™s an accidental death.â€
So what should you do if you get an offer from your bank or insurance company for accidental death insurance? If you donâ€™t think you have enough coverage, â€œyou should just buy more term insurance instead,â€ says Kleffner. â€œItâ€™s pretty clear that the accidental death coverage is not worthwhile.â€