Accidental Death Insurance Is a Waste of Money, Says Clark Howard-Here's What to Buy Instead

Accidental death and dismemberment insurance pays only if death or limb loss occurs in a qualifying accident, excluding causes such as heart disease, cancer, and stroke. Accidents account for a small share of U.S. deaths, while heart disease and cancer account for a much larger share. AD&D coverage therefore depends on dying in a narrow slice of possible outcomes. Level term life insurance pays beneficiaries regardless of cause as long as death occurs during the term. For a healthy 35-year-old non-smoker, a 20-year, $500,000 level term policy can cost about $20 to $30 per month, with premiums locked for the term and benefits paid tax-free. AD&D may appear cheaper on the surface, but it covers far fewer scenarios.

"“Potentially, yes, and pushes to try to get you past the free coverage to paid coverage,” he warned. Then came his verdict on the product itself: “In terms of buying an accidental death and dismemberment policy, I'm not into those at all.”"

"Accidental death and dismemberment (AD&D) insurance only pays out if you die or lose a limb in a qualifying accident. Heart disease, cancer, stroke, and most other causes of death are excluded. According to the CDC, accidents (unintentional injuries) account for roughly 6% of U.S. deaths in a typical year. Heart disease and cancer together account for closer to 40%. An AD&D policy is a bet that you will die in the narrow slice rather than the wide slice."

"Level term life insurance pays your beneficiary regardless of cause, as long as you die during the term. Howard pushed Linda toward that product with the question that actually matters: “Do you have a good level term insurance policy to provide for those who might depend on you financially?”"

"Consider a healthy 35-year-old non-smoker. A 20-year, $500,000 level term policy commonly runs in the range of $20 to $30 per month at that age and health class. Premiums lock in for the full term. If the policyholder dies of any covered cause within those 20 years, the family receives $500,000 tax-free. Now compare a typical employer-sold or credit-union-sold AD&D policy at, say, $10 per month for $250,000 of accidental-death coverage. The headline cost looks lower."

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