The number of accidents in the United States, from falls to car crashes to drownings, has made accidental death benefit riders (also known as a “double indemnity riders”) one of the most popular riders among life insurance companies broadly, from term life insurers insuring millennials to final expense insurance carriers ensuring that seniors can afford the funeral or cremation of their choosing. But what is an accidental death rider, exactly?
This rider provides an additional payout to the beneficiary if the insured passes away due to an accident.
Let’s dive into the details.
What Is A Life Insurance Rider?
A rider is an optional add-on feature to a life insurance policy. It gives you either more coverage or more flexibility.
Insurance riders allow you to customize your policy to fit your exact needs. However, adding a rider means higher monthly premiums. Therefore, you should scrutinize the costs and benefits to ensure that a specific rider is worth it for you.
Insurance rider example can be any of these:
- Waiver of premium rider = waives your obligation to make premium payments if you become disabled and can no longer earn an income
- Child rider = allows you to add small amounts of life insurance for your children (~$20,000 per child)
- Term conversion rider = allows you to convert a term life insurance policy into a whole life insurance policy
What Is An Accidental Death Benefit Rider?
An accidental death benefit rider (also known as a “double indemnity rider”) is an optional feature you can add to your life insurance policy. So what is accidental death benefit and how does it affect a life insurance policy?
An accidental death benefit rider provides a higher payout if the insured dies in an accident.
How Do Accidental Death Benefit Riders Work?
In most cases, accidental death rider payout that’s offer is 1-2 times the standard face value of the policy. The rider’s death benefit is paid in addition to the policy’s standard death benefit amount. Here’s how accidental death rider definition explains it:
A policy with an accidental death benefit rider can provide your beneficiary a larger payout (2-3 times original death benefit!) if you die due to a covered accident
Accidental benefit rider can be added to both whole life policies and term life policies.
Let’s look at a rider in insurance example. Let’s say Joe has a $1 million term life insurance policy for which he pays $100 per month in premiums.
At purchase, he adds an accidental death rider in term plan policy, meaning he has to pay an additional $15 in premiums per month, for a total of $115 per month.
Let’s say that he then passes away due to an accident (such as a car accident) before his policy expires. His family would then receive the $1 million payout from his life insurance coverage and an additional $500,000 payment from his double indemnity benefit, for a total payout of $1.5 million.
When an accidental death benefit is added, it will probably result in a slightly higher premium; however, this benefit increases the total benefit paid to the policy’s beneficiaries. In other words, the beneficiary receives the death benefit paid by the policy itself plus any additional accidental death benefit covered by the rider.
How Do You Prove Accidental Death?
Finally, you may have to prove that the insured’s death was caused by an accident when submitting a claim. Here are several ways that you can do so:
- A fully completed Accidental Death Benefit Claim Form
- Death Certificate
- A medical report indicating the cause of death
- A written statement outlining the date, location, and circumstances of the accident
- Police FIR copy
What Do Accidental Death Benefit Riders Cover?
Accidental death benefit riders offer extra coverage if you have a fatal accident, wrongful death, or homicide. What does double indemnity mean and what are examples of accidental death that it covers? Here are some:
- Car or traffic accidents
- Airplane crashes
- Workplace incidents
- Fire-related injuries
- Firearm accidents
Apart from these examples of accidental death, you rider may include major injuries or major trauma. This means you may also be covered for limb loss; loss of hearing, eyesight, or speech; or partial or permanent paralysis.
What Does This Rider NOT Cover?
The major cause of death that accidental death benefit riders do not cover is illness (in addition to natural cause deaths, of course).
This coverage is offered as part of a separate rider (an “accelerated death benefit” rider).
Like AD&D insurance itself, this rider also does not cover:
- Self-inflicted deaths (suicide)
- Deaths that occur while under the influence of drugs or alcohol (e.g., even accidental, illegal drug overdose deaths)
- Deaths that occur while engaged in illegal activities
Who Needs An Accidental Death Benefit Rider?
An accidental death benefit rider may be worthwhile if you:
- Work in hazardous environments or if your job involves heavy machinery
- Travel or commute frequently, whether by car, plane, or other transportation methods
However, note that you might not qualify for this rider if you have hobbies like skydiving or mountain climbing or work in certain professions, like law enforcement, firefighting, or the armed forces.
In general, because of the strict parameters under which the death or injury must occur to get a payout, an accidental death rider usually isn’t worth the cost.
Which Companies Offer This Rider?
Nearly all traditional life insurers offer this rider; however, as a rule of thumb, newer, online-first life insurance companies (such as Bestow, Ethos, Ladder, and Haven, among others) do not offer this rider.
See below a list of companies that allow you to add an accelerated death benefit rider to your policy:
- American General Life (AIG) Insurance Company
- American National Life Insurance Company
- Banner Life Insurance Company
- Lincoln National Life Insurance Company
- Mass Mutual (ex. Haven Life)
- Mutual of Omaha
- Penn Mutual
- Principal National Life Insurance Company
- Protective Life Insurance Company
Are life insurance riders worth it?
Whether or not they are worth it depends on your individual needs and financial situation. Riders can provide additional coverage or benefits that your standard policy does not, but they can also increase your premium
We hope you enjoyed this guide on double indemnity meaning in insurance. If you have any additional questions, don’t hesitate to leave a comment or send us an email at hello [at] getsure.org.
We hope to see you back here soon!
The GetSure Team
- sec.gov. Securities & Exchange Commission