Is accident insurance really worth the cost?

I am probably jinxing myself, but the odds are against me dying in an accident -- especially in a way that would let my family cash in on an accidental death benefit.

"Act now!" You probably get the form in the mail too, if you have a general life insurance policy. It's an offer to increase your coverage through accidental death for what seems like a paltry monthly amount.

But is it really worth the money? Am I really likely to die in an accident?

According to Statistics Canada, accidents or unintentional injuries were the fifth leading cause of death in 2008 -- the latest information available.

Cancer was No. 1, followed by heart disease, stroke and respiratory diseases; only 4.3 per cent of Canadian deaths that year were accidental.

You really need a life insurance policy, not an accidental death policy.

Jim Christie, president of the Canadian Institute of Actuaries, says the evidence suggests young people are far more likely to die in accidents.

"Accidents are a major cause of death for younger individuals, say 15 to 30," says Christie, offering no opinion on whether or not those people are more likely to have insurance.

They are not.

So, if I'm a 47-year-old boring male with two children who drives around in an oversized sport utility vehicle armed with snow tires, paying decent attention to the speed limit, you have to believe I'm a lower risk.

"In the late teens, certainly up to the 30s, (accidents) are usually the No. 1 or No. 2 cause of death," says Christie. "As you get older you take more precautions. If you have kids, and you need money to look after them in the event of your death, you really need a life insurance policy, not an accidental death policy."

Mark Halpern of illnessprotection.com says there are some cases in which an accidental death policy might make sense to a client, but it is not the preferred option.

"If a person has a heart attack or gets cancer, you get nothing (with accidental death)," says Halpern.

"There are people out there who think they have real life insurance when all they have is this accidental death. You have life insurance and you rob a bank and you get killed and your family will get paid."

Let's say you want $100,000 in insurance at a guaranteed rate for a 10-year term.

For a 40-year-old healthy male non-smoker, it would be $13 a month. To double that benefit, and add $100,000 in accidental life, it would be another $9 a month.

"You are spending on something you won't likely ever collect," says Halpern, noting that for $23 a month the same person could get $200,000 worth of term insurance.

But there is a scenario in which you might want to buy an accidental death benefit, namely if you are otherwise uninsurable.

"The other reason might be that you are in a high-risk profession. Maybe you test dynamite for a living," says Halpern. "Maybe you travel a lot and you're in planes a lot."

There are reasons other than bad health for being denied insurance.

Halpern says he had a client with a driving record that disqualified him from getting life insurance, so he had the client buy accidental death insurance until his driving record was considered clean.

Before you jump into an accidental death policy, you should also take a close look at it. There are a number of exclusions on mine. For starters, you cannot be drunk driving or even drunk biking. You also cannot have any drugs in your system that are not prescribed by a doctor. Don't die in the dental chair and forget about dying from an infection unless you received it from an external visible wound caused by an accident.

Lawyer Michael Smitiuch of Smitiuch Injury Law says companies refusing to pay out are a regular occurrence for a variety of reasons.

"What I see is we have a lot of cases involving life insurance generally and specifically with the accidental life insurance. The area where we encounter issues is typically with the exclusions and they usually involve alcohol and drugs," says Smitiuch, who says when you die, insurance companies dig a little deeper into your life. "They look for a misrepresentation."

The answer is to read the contract very carefully before you sign. That's not to say accidental life can't make sense for some people. But it's no accident insurance companies offer the product at rates which can be high relative to their risk.

-- Financial Post

Republished from the Winnipeg Free Press print edition June 21, 2012 B5