Accidental death benefit is a type of insurance policy that pays in the event of the accidental death of an insured person. It is different from life insurance, which pays upon the death of the insured person under most circumstances. It is typically part of general insurance, along with other types like travel, house, fire, and auto insurance.
Accidental death is specifically defined in most insurance contracts. Generally speaking, accidental death is death caused by an unnatural cause, such as a traffic collision, an industrial accident, poisoning, etc.
Accidental death is a pure protection policy, which means that the insured person only pays for the protection. It is unlike life insurance, which can be an investment vehicle.
History of Accidental Death Benefit
The concept of accidental death benefit or accident insurance came about in the 19th century. The period saw the invention of the steam engine and rapid advancements in transport technology. During that time, railroads expanded rapidly across England, but the speed of the expansion left little consideration for safety. Consequently, rail accidents and resulting deaths rose, leading to the development of accidental death insurance in the country.
The idea soon traveled west to the United States of America when an American architect, James G. Batterson, imported the idea from England. In 1863, Batterson founded the now well-known Travelers Insurance Company. The company was responsible for creating many new products in the insurance industry, such as auto insurance, flight insurance, and even space travel insurance for astronauts.
Most accidental death policies also make a provision for dismemberment. Hence, they are often referred to as Accidental Death & Dismemberment (AD&D) policies. Dismemberment is defined as the loss of any bodily appendage such as limbs, ears, etc. or sight due to an accident.
AD&D policies pay out the benefit in the event that an insured person survives the accident, but is severely injured or disabled as defined in the dismemberment policy.
Accidental death and dismemberment is very much a legal issue. Despite the number of legal precedents to make the claims process clear, the common law around AD&D policies continues to evolve.
Many legal nuances are related to processing an accidental death claim. The insurer and the insured sometimes disagree on the nature of an accident, leading to the development of concepts in common law that resolve such disagreements. Some of the concepts are discussed below:
1. Proximate cause
The concept of proximate cause aims to specify an accident as the primary cause of death or injury. It leads to two kinds of interpretations. One, if an accident was caused due to some pre-existing condition, such as an illness, then the insured person may not receive any benefits.
Two, even if the accident is caused by a pre-existing condition, the insured can recover benefits as long as the accident contributed to the death or injury of the insured.
In line with the proximate cause, substantiality aims to measure to what extent the accident contributed to the death or injury of the insured. Sometimes, a claim may be denied if the accident is proven to have contributed little towards death or injury.
3. Predominant cause
Predominant cause is similar to the proximate cause but places the responsibility on the insurer to prove that the insured would have died of pre-existing conditions even if the accident had not taken place. Simply put, the accident did not significantly shorten the lifespan of the insured person.
Most AD&D policies define what constitutes accidental death. It is typically done using exclusionary clauses in the contract. The clauses define what the insurer considers are the grounds on which the insured will be denied any benefit. Common examples of such exclusions are:
Driving under the influence: If an insured in an accident is found to be driving under the influence of a substance, then the insurer is under no obligation to pay benefits, as the act is considered voluntary.
Cases of poisoning: If the insured dies of poisoning by ingesting drugs, which are not prescribed by a doctor.
Criminal acts: If an insured person dies or is injured in pursuit of a criminal activity, they lose their AD&D benefits.
Non-commercial aviation: Any death or injury that happens in an aviation accident when flying, or flying, in a personal aircraft.
Suicide or attempted suicide: Suicide is considered a voluntary act. Hence, a person committing or attempting suicide, or their beneficiaries, cannot make any claim on benefits.
Active duty: Soldiers on active duty are not eligible for AD&D benefits because joining the armed forces and the entailing duties are voluntary acts.
Even after many years and several court precedents, there is still contention, and it makes sense to look at every case individually instead of an overarching framework. The debate and confusion around AD&D provisions today lead many people to question whether accidental death insurance is worth its price. Given that most people already own life insurance, it can be argued that AD&D is unnecessary.
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