Accidental death insurance makes no sense

By Duncan Hood on January 2, 2008
Estimated reading time: 2 minutes

If you're going to spend the money, more term insurance is your better bet.

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€