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How would your loved ones cope if you were involved in an accident? Although you never want to contemplate such an unpleasant scenario, it is something that warrants careful consideration, especially if you’re looking to financially aid your family after you pass away.

Accidental death insurance is a life insurance product specifically designed for these circumstances.

What is accidental death insurance?

Accidental death insurance pays a lump sum benefit to your nominated beneficiary or estate if you were to pass away due to an accident.

Accidental death insurance is quite similar to life cover; however, no benefit is paid for death caused by illness.

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What is considered accidental death for insurance purposes?

Life insurers generally define accidental death as one that results from an unexpected and unintentional, violent, external, and visible circumstance, and this circumstance must be separate from any other cause – that is, the accidental death cannot be related to any pre-existing issues, like those relating to your physical or mental health. Many insurers will pay claims on accidents that result in death after 90 days of the incident occurring.

How insurers define accidental death is important, as this definition will affect when you are or and are not covered, should you pass away in an accident.

What does accidental death insurance cover?

Depending on your policy, accidental death insurance is likely to cover unexpected, unpredicted events like death as a result of drowning or a transport incident.

For some policies, you can include cover for your children as an add-on to your own accidental death insurance policy. On top of this, some policies feature 24-hour worldwide cover as well, which can be particularly helpful if you’re travelling overseas.

What are some exclusions in accidental death insurance?

Before taking out accidental death insurance, it’s vital you understand what some of the exclusions are – otherwise, your loved ones may be knocked back if they make a claim on certain, uninsured events.

Typical policy exclusions may include a death caused by:

  • illnesses
  • cancer
  • heart attack
  • suicide
  • an accident that is caused by the insured’s deliberate act or intention
  • infectious diseases
  • adventure sports, like scuba diving, recreational aviation, and motor racing, which you participate in regularly
  • misuse of alcohol or drugs
  • illegal acts
  • acts of war, either formally declared or otherwise, including hostilities, civil commotion
  • professional sports.

When applying for your policy, if you do not honestly answer your insurer’s questions, your claim could be declined. That’s why it’s always important you fulfil your duty of disclosure, as per the Insurance Contracts Act 1984.

Furthermore, accidental death benefits may not be payable if your death occurs after a certain amount of time has elapsed following the accident (e.g. three or more months afterwards).

What is the difference between life insurance and accidental death insurance?

Life insurance (otherwise referred to as term life insurance) policies are typically more expensive than accidental death insurance policies, as they generally provide benefit payouts for most cases of death, or if you’re diagnosed with a terminal illness with typically only 12 months to live.

On the other hand, stand-alone accidental death insurance only provides cover for deaths arising from an accident as defined by the insurer. It is for this reason that accidental death insurance premiums are typically cheaper, and cover is more basic.

What’s the difference between accidental death insurance and personal accident insurance?

Personal accident insurance is designed to provide a benefit to cover injuries sustained from an accident. Conversely, accidental death insurance provides a benefit to your beneficiaries should you pass away in an accident.

Payouts for either type of insurance depend on whether you meet these policies’ requirements.

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Is accidental death insurance really worth it?

According to the Australian Government, there were 1,225 deaths on Australian roads during 2017 – a 5.3% increase compared to 2016.

While many of us do our best to stay safe, the unknown is largely out of our control, particularly while we’re travelling on the roads. Accidental death insurance offers peace of mind knowing if you’re caught up in the unexpected, your loved ones could be aided with financial support.

Depending on the policy, you can expect guaranteed acceptance for accidental death insurance, with cover up to $1,000,000. Some policies can offer protection until the anniversary before your 99th birthday.

Frequently Asked Questions

Does the payout reduce as I age?

Generally, the benefit payable on your accidental death insurance will not reduce as you age. If you are eligible, you may be able to increase your benefit to a justifiable amount. On top of this, payouts typically increase in line with the Consumer Price Index (CPI) each year.

Policies can also include guaranteed insurability, where you can increase your sum insured to suit personal life events, like marriage and having children.

Does accidental death insurance cover heart attacks?

Accidental death insurance does not cover heart attacks if they occur naturally. However, if a heart attack arises from an accident, it is possible the insurer may provide cover.

Does term life insurance cover accidental death?

Term life insurance policies pay a lump sum in the event of death or terminal illness. These policies pay for accidental death, as well as a range of other deaths, like those arising from a pre-existing condition. As it is a more comprehensive level of life cover, term life insurance premiums can be more expensive than premiums for stand-alone accidental death policies.

Accidental death insurance is typically a standard feature in comprehensive life insurance policies. It is possible to receive accidental death cover as a standalone product, however many prefer to bundle it with other life insurance products to increase value for money, as well as to increase cover for all kinds of situations.

What should I be aware of when taking out accidental death insurance?

It’s important you realise accidental death insurance may not provide all the cover you need for your circumstances. For example, if you pass away because of a pre-existing condition or an illness, your beneficiary will not receive a benefit. Some life insurers offer cover for different types of death, but this will generally cost more in premiums than policies that only cover accidental death.

Who can take out accidental death insurance?

Generally, most Australian or New Zealand citizens aged 18 to 75 can take out accidental death insurance, as well as most permanent residents living in Australia. Aside from this, there are usually limited restrictions on who can take out this type of policy.

Your next step in choosing the right life insurance policy

When it comes to life insurance, it’s important you choose the policy that provides the right level of cover to suit your needs, budget, and lifestyle.

To help you take the very first steps, try our helpful life insurance calculator. Simply enter information about your lifestyle, and we’ll offer a guide to the minimum amount of cover you might wish to consider in a policy. Also, take a look at How much life insurance will I need? for helpful advice.

To ensure you choose the right life insurance for your needs, simply compare a range of life insurance policies from leading insurers with our free online comparison service. Cover for accidental death is a standard feature across all our partners’ life insurance policies.

At Compare the Market, we believe life is precious; that’s why we’re here to help you find a great-value policy.

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