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The three stooges of life insurance

“One of these days, you’re gonna poke my eyes out.”

Well, good news! The life insurance industry has coverage for that! It’s called AD&D.

Accidental Death and Dismemberment provides two types of benefits.  The first, the ‘accidental death’ part provides a specified death benefit if you die as the result of an accident.  That’s not the opposite of  ‘on-purpose’, it’s the opposite of dying due to medical reasons.  If you get hit by a bus, they pay.  Have a heart attack?  No benefit.

The second benefit is the dismemberment part.  This benefit pays a specified amount if you lose a limb.  It also may cover loss of sight if for example somebody poked your eye out.

While both of these benefits may sound attractive, unless you’re Curly and in danger of having your eye poked out, this is coverage you should skip.

In terms of the death benefit, if you need a cash amount upon your death you almost certainly need it no matter how you died – medically or by accident.  Accidental death insurance is likely to leave your beneficiaries with nothing if you don’t die in the ‘correct’ fashion.  If they need coverage, then you should investigate proper life insurance coverage that pays regardless of how you die.  Otherwise you’re gambling  with your death benefit.

With respect to the dismemberment part, consumers may be inclined to think of this as ‘disability’.  Unfortunately there are two issues with this assumption.  First the dismemberment benefit is likely to be minimal.   Amounts of $5000 to $10,000 would be typical.  And if you’re disabled for your lifetime, this is certainly not going to be enough.  Secondly, it masks what you really should have – true disability insurance.  Disability insurance (or long term disability/LTD) covers a portion of your monthly income if you’re disabled, often until you’re 65.  This type of benefit is often available through your workplace’s group benefits and should definitely be one of the primary considerations in your insurance portfolio.

In short, there’s two things worth noting.  First, you should not purchase AD&D and instead purchase proper life and disability insurance.  And secondly, there’s far too few excuses in the insurance industry for us to post pics of the three stooges.

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