Is accidental death / dismemberment insurance worth it?

[rpsandiego]

My spouse has life insurance which he took before we got married but I was denied for some health reasons out of blood tests.

I was offered a 1.50% per 10,000 worth of coverage for accidental death/dismemberment by CUNA (Credit Union Association)'s CMFG Life Insurance. I'm 27 and my spouse in 29. Between the two of us, the policy benefit anywhere between 10,000 to 300,000 would cost between $720 to $21,600 in 40 years, respectively (assuming we don't ever need it).


If we are to believe how accidental insurance is sold out to be, there are some merits to it.

However, I'm not sure whether to take it based on a couple of articles I've read:

• The fact is that most people die of natural causes. Buying accidental death insurance is a little like playing red 37 at roulette tables. It's nothing more than gambling.
  
  Read more: http://www.bankrate.com/finance/insurance/accidental-death-insurance-worth-keeping.aspx#ixzz3ZK81D1Lo
  
  
• http://forums.moneysavingexpert.com/showthread.php?t=296091&page=1

 

[Matt]

My spouse has life insurance which he took before we got married but I was denied for some health reasons out of blood tests.

I was offered a 1.50% per 10,000 worth of coverage for accidental death/dismemberment by CUNA (Credit Union Association)'s CMFG Life Insurance. I'm 27 and my spouse in 29. Between the two of us, the policy benefit anywhere between 10,000 to 300,000 would cost between $720 to $21,600 in 40 years, respectively (assuming we don't ever need it).


If we are to believe how accidental insurance is sold out to be, there are some merits to it.

However, I'm not sure whether to take it based on a couple of articles I've read:

• The fact is that most people die of natural causes. Buying accidental death insurance is a little like playing red 37 at roulette tables. It's nothing more than gambling.
  
  Read more: http://www.bankrate.com/finance/insurance/accidental-death-insurance-worth-keeping.aspx#ixzz3ZK81D1Lo
  
  
• http://forums.moneysavingexpert.com/showthread.php?t=296091&page=1

All insurance is basically a losing bet overall. To take your analogy of roulette, the house (should) always win. So what it comes down to really is knowing that you are paying a premium to the house, and whether doing so is a smart move or not.

It's a bit of a tricky combination, you touched on one side of it - the cost of wasted premiums if all is good, but you didn't really touch on the impact (financially) to your spouse if you were to die. I personally have avoided life insurance until just this week, I am taking on more risk which may involve us tapping into our resources for the first time as I build a new business. I decided that life insurance makes sense on that tiny chance that I should die in the few years that I'm building the business.

So - the answer would be, if you were to die (as morbid as that statement sounds) what would your spouse need financially. Could they 'get by' in which case maybe you don't need it, but are you sharing costs right now that your income loss would cause an issue for - eg do you have a mortgage - can they pay it without you?

 

[greatbooga]

My understanding is that "accidental" D/D policies are generally a bad deal...lots of exclusions, etc...my thought is to just do the calculations that @Matt suggests and then buy term life if you decide it fits your situation.

BUT - I'm curious if someone has another perspective... I'm NOT an expert in this area

 

[rpsandiego]

@Matt @greatbooga - thanks for the feedback!

To provide more context, my partner is an attorney but he's still starting his practice and makes about 30-40% of my pay. We don't have a mortgage and don't have kids. Student loans are almost paid ($5k), just revolving credit card spent every month... and no outstanding car loans.

 

[Matt]

@Matt @greatbooga - thanks for the feedback!

To provide more context, my partner is an attorney but he's still starting his practice and makes about 30-40% of my pay. We don't have a mortgage and don't have kids. Student loans are almost paid ($5k), just revolving credit card spent every month... and no outstanding car loans.

Would he be able to get by in terms of rent payments etc without your income? If so then i'd lean towards not getting it, or getting maybe a moderate amount that could provide a small payment to cover any costs such as funeral expenses etc.

It's really a case of looking at the situation and thinking, if this were to happen, would they be OK financially. With my life insurance decision I bought too much because that allowed a bit of time to grieve and decide what to do next - as a parent my wife might need to stop working to look after the baby until some sort of system was figured out, so I put in a bit of a cushion for some time off work.

But before we had the baby, our mindset was that we would rather keep the premium payments in our pocket, and the other person could figure it out.

 

[Haley]

@Matt did you note the question was about AD&D, not Life insurance?

With AD&D the question is, are you for some reason more at risk of accidential death or limb loss? If you work in a dangerous industry or have a risky hobby (that isn't excluded) then maybe, as an add on policy. Otherwise it is not needed.

.5% of deaths are accidental. The vast majority of us will die of natural causes.

If you are the high earner for now you may want to explore high risk policies or ways to get in on group policies. There are companies that will write policies for people other companies deny, cancer survivors for example. There are also sometimes ways to get into group policies through a union or fraternal organization. Group policies are not based on individual risk factors.

By the way I'm assuming you are in the US.

 

[Matt]

@Matt did you note the question was about AD&D, not Life insurance?

Yes. OP mentioned being denied for Life Insurance, so I was taking the perspective of it being the same question, even if it had a lower ROI. IE the premium is a lot higher because not only does it cost more, but it also has exclusions. But all that said, the end point was the same - if someone was to die and the survivor needed financial support it might still be a good option, and unfortunately, the best option they might be able to qualify for in this situation.

 

[MickiSue]

IF you think that AD&D insurance makes sense, then always pay for everything that is potentially dangerous with a CC. Check the "benefits" brochure that comes with your CC. Nearly all contain language about coverage for AD&D when that card was used to pay for the proximate cause of the injury or death. (Airline tickets and the plane goes down, car rental and the car crashes, etc.)

However, even if you drive your car into a tree with no one else there, your own auto insurance should have personal injury coverage, that is required as part of your policy. Also, of course, if your injury or death is due to the fault of another, either an individual or a company, you (or your surviving spouse) can hire an attorney to assist in collecting from the party who caused the incident.

Really, what you should, no doubt, be looking for is a way to get a reasonable amount of term life coverage for a reasonable amount of money. For other causes, you already have coverage.

And, as an aside, AFLAC really does have pretty decent coverage for not a lot of money, for injuries that are not life threatening.

 

[Haley]

Yes. OP mentioned being denied for Life Insurance, so I was taking the perspective of it being the same question, even if it had a lower ROI. IE the premium is a lot higher because not only does it cost more, but it also has exclusions. But all that said, the end point was the same - if someone was to die and the survivor needed financial support it might still be a good option, and unfortunately, the best option they might be able to qualify for in this situation.

If someone with only AD&D coverage were to die and the survivor needed support they would be screwed in 99.5% of the cases.
In this case it looks like there isn't really any need to be concerned. Kids would change that, kids change everything.

 

[DebentureBoy]

I apologize in advance...

My uncle Stumpy always recommended ADD insurance.

 

[KennyBSAT]

I can't scroll past this thread without thinking about a story I'll tell on my dear wife. She lost her leg to cancer as a teenager and before we were married, on the island of St. Vincent while shopping with some friends, had her artificial leg fall completely off while crossing a main street. A friend scooped up her leg and she hopped across the street and into a clothing store where one friend asked frantically of an unsuspecting clerk: 'Where is your dressing room? Her leg fell off!' and Bonnie went hopping on by, followed by her other friend. And her leg.

Accidental dismemberment is hilarious at our house! If only I could get her to go along with a few Halloween pranks...

 

[rpsandiego]

With AD&D the question is, are you for some reason more at risk of accidential death or limb loss? If you work in a dangerous industry or have a risky hobby (that isn't excluded) then maybe, as an add on policy. Otherwise it is not needed.

By the way I'm assuming you are in the US.

Sorry for the late reply.

I work an office job (IT), so not a high-risk and don't take part in extreme sports. Yeah, I'm based in the US.

Thanks for the insight. The calculus really indicates NOT buying an AD&D insurance.

 

[cdancer20]

This is a good thread. I've wondered the same. I currently have it through my job but it's a really low yearly premium. I'm thinking now though that maybe I should just drop it. The only reason that I had was in the rare case of dismemberment. That would pay you if you are still alive, correct? While I don't do anything dangerous, who knows what might happen.

 

[cdancer20]

Oh yeah. I should also add that I'm not married and have no kids. My current insurance, which is paid through my job, would go 50/50 to my parents and it would be more than enough for my final arrangements and then to pay my mortgage until my house could be sold.

Slight OT but a few months ago, we lost my 25 year old nephew to a terrible accident. My family was stuck having to pull together money to pay for the funeral. Since then I've been pushing on everyone that it's very important to have life insurance. You never know what might happen and unfortunately accidents happen every day. You don't want to leave your family footing the bill.