Does Life Insurance Coverage Include Accidental Death? A Comprehensive Guide

Life insurance is designed to provide financial security in the event of the unforeseen death of the insured. Many wonder if accidental death is included in their coverage. This guide will break down the details and necessary considerations.

Understanding Life Insurance Coverage

Life insurance policies typically cover all causes of death, including accidental death, as part of a standard policy. However, there are certain exclusions and conditions that must be considered.

Standard Exclusions

One of the main exclusions is suicide, which is covered only after a specified period, usually the first 24 months. Another common exclusion is fraud.

Occupational Hazards

Life insurance policies can also include specific exclusions for particularly Hazardous occupations. For example, an individual with a job involving flying private aircraft may choose to exclude such risk or pay an additional premium for full coverage.

Favoring Full Coverage

Agencies often recommend full coverage, especially in high-risk professions like private aviation. This can be achieved by paying an extra premium, which offers peace of mind and comprehensive protection against any accidental death.

Accidental Death and Related Coverage

Accidental death coverage is often included as a rider or additional benefit in a life insurance policy. It typically covers death resulting from an accident but may also include dismemberment coverage, meaning payments in the event of losing a limb or other body part.

Customizable Policies

It's important to examine the specifics of your policy. In some cases, clients opt for coverage that includes death due to accidents only, which comes with certain exclusions. For example, one client funded a buy-sell agreement using accidental death coverage because they believed it was more cost-effective. However, it's crucial to understand the limitations, as in the case where an accidental death occurred but the policy only covered up to 90 days of lingering death.

Understanding the Policy Terms

When reviewing a life insurance policy, it's essential to understand the terms and conditions. This includes knowing the sum assured and any limitations on the coverage period. A lingering limit in a policy can significantly impact the payout in cases of prolonged death.

Case Study: Accidental Death and Prolonged Death

Richard, a client who had funding for a buy-sell agreement, opted for accidental death coverage because he believed it was more cost-effective. Unfortunately, his partner's death extended beyond the 90-day lingering limit defined in the policy, resulting in no payout.

Recommended Approach

If you're looking for comprehensive coverage, it's advisable to opt for a policy that covers death from all causes rather than just accidental death. This provides broader protection and ensures that your loved ones are financially secure in the event of any unexpected death.

Takeaway

Life insurance coverage includes accidental death as standard, but you should carefully review your policy to understand the terms and limitations. Working with an experienced insurance agent can help you make informed decisions and choose the best coverage for your needs.