Is Accidental Death Coverage on Your Car Insurance Worth Having?

Among the optional coverages an auto insurer may list, an accidental death benefit is one of the easiest to misunderstand. It sounds like life insurance. It is closer to a fixed-sum accident benefit with a narrow trigger: a car accident, and a loss from a specific list.

How it typically works

Where it is sold, the coverage names the people it protects, often the named insured and family members living in the household, and sometimes only those named on the declarations page. If one of them dies, or suffers a listed loss such as the loss of a hand, foot or sight, because of a car accident and within a stated period after it, the policy pays a fixed amount. Dismemberment benefits are commonly a percentage of the death benefit. Each of these terms varies by insurance company.

What it is not

• Not liability insurance. It pays your household, not people you injure.
• Not life insurance. Life insurance pays for death from almost any cause. This pays only for a covered car accident.
• Not medical coverage. Medical payments coverage pays reasonable medical bills; this pays a fixed sum for a defined outcome.
• Not disability income. It does not replace wages during a long recovery.

A worked example

Two households each carry the same policy with a fixed accidental death benefit. In one, a parent dies in a freeway collision; the benefit pays its fixed amount to the beneficiary within the policy's terms, regardless of who caused the crash. In the other, a parent dies of a heart attack at home; the benefit pays nothing, because it was not a car accident. The second household needed life insurance. The first needed it too, because a fixed accident benefit rarely matches what a family loses.

When it can make sense

Be honest about the gap it fills. It can be a modest supplement for a household without much life insurance, or a reassurance for someone who drives a great deal. It is a poor substitute for adequate life or disability coverage, which protect against far more ways of losing an income.

It can also make sense to skip it entirely. If your household already carries enough life insurance, an auto-only death benefit adds little. Spend the same attention on your bodily injury limit, which protects your household's assets from claims by others, and your uninsured motorist limit, which protects your household from drivers who cannot pay.

Questions to ask before you add it

1. Who exactly is a covered person, and does it follow us as pedestrians or passengers in other cars?
2. What is the time limit between the accident and the death or injury?
3. What are the exclusions, for example impairment, racing or use for hire?
4. Does it duplicate a benefit from my employer, my credit card or a life policy?

If you want to see what it would add to your policy, ask for it as a separate line when you request a quote, so you can judge it on its own.