Difference Between Accidental Death and Life Insurance (With Table)

Accidental death and life insurance are two types of coverage that may be offered by a company. It is important to know the difference between these two before you make a decision about which one best suits your needs. Accidental death coverage will pay out if there is accidental injury or illness (including heart attack, stroke, cancer) that causes your death. Life insurance pays out after an agreed-upon period of time if you die as the result of natural causes such as old age or an illness unrelated to the accident.

Accidental Death vs Life Insurance

The difference between accidental death and life insurance is that Accidental death coverage will pay out if there is accidental injury or illness (including heart attack, stroke, cancer) that causes your death. Life insurance coverage pays out if you die from natural causes.

The accidental death coverage will pay out if there is an accident that causes the injury or illness. If you are killed during a crime such as a robbery, your family will receive the life insurance payout. In accidental death coverage, you can choose how much coverage your family will receive for the accidental death.

Life Insurance pays out after an agreed-upon period of time if you die from natural causes. The coverage doesn’t payout if it’s the result of an accident or injury (including heart attack, stroke, cancer). You may not have enough money to cover your family’s needs in the event that you died before retirement age. You may not be able to get life insurance if you have a pre-existing health condition.

Comparison Table Between Accidental Death and Life Insurance

Parameters of Comparison Accidental Death Life Insurance
DefinitionAccidental Death occurs when a person dies from an unintentional injury such as falling, being hit by another vehicle or object, slipping and tripping, or drowning.A contract that guarantees the policyholder’s life in return for regular premiums paid over a given period. The death benefit is usually used to cover unpaid debts, funeral and burial expenses, college tuition fees etc.
TypesAccidental deaths can be categorised into two types – those that happen during work hours but off duty and those that happen off duty.Life insurance includes term, universal or whole, accident-only, health and disability income protection; death benefits may be paid as lump sums or instalments over time.
AdvantagesAccidental Death is a type of insurance that is much more affordable than usual life insurance. It covers the death or injury that may happen as a result of the accident.Life Insurance is a type of insurance that offers a variety of benefits such as loans, mortgage protection and tax-deferred savings.
DisadvantagesIt only covers death or injury that may happen as a result of the accident.It is relatively more expensive than accidental death insurance because it offers additional benefits to the insured individual.
ExampleAccidental death is when someone dies from an event that was not their intention.An example of life insurance would be if a person has dependents, and they want to make sure they are cared for in case something happens to them.

What is Accidental Death?

Accidental death is the loss of a person due to an accident. The majority of accidental deaths are caused by car accidents, but they can also be related to falling off buildings or bridges, drowning in water, and other incidents that involve no human fault on behalf of another individual. There are two types of insurance coverage for accidental death: life insurance and accidental death coverage.

In some cases of accidental death, the family can receive payment to help cover funeral costs or medical bills. This money is received through a claim on life insurance policies and accidental death coverage.

The majority of people who buy accident-related life insurance policies do so because they have dependents that would need financial support if they were to die. Accidental death is a good idea for those people who have dependents that would need financial support in the event of their death.

The positives to accidental death are that the person is able to choose who would receive this money. They can also decide what amount their beneficiaries will get in case something happens. The negatives are that if someone is injured or killed at work—they most likely won’t be eligible for an accident-related policy because they are not at home.

What is Life Insurance?

Life insurance is a contract between the life insurer and you in which you agree to pay premiums in exchange for coverage that pays your loved ones if something happens to them. Types of life insurance include term, universal or whole, accident-only, health and disability income protection; death benefits may be paid as lump sums or instalments over time.

Life insurance, also called a life assurance policy or “term” insurance, pays out income to your family in the event of death. The money can be used for anything from funeral costs to college tuition. It provides an essential safety net in case something happens to you.

Life insurance provides protection against the risk of loss of income and is often a part of an employee’s compensation package. In the event of death, life insurance pays out a “death benefit” to help your family pay for the things that happen when the breadwinner of the family dies.

The positives to life insurance are that it will help pay off debts or funeral expenses. It doesn’t cover accidents as accidental death does, but if someone dies from any other cause, they can benefit financially by having a life insurance policy in place with an amount set for their loved ones.

Main Differences Between Accidental Death and Life Insurance

  1. Accidental death insurance pays a lump sum benefit in the event of accidental death, while life insurance does not. Life Insurance only pays out if you pass away from something other than accidents such as cancer or heart disease.
  2. Accident Death Insurance is less expensive and can be applied for without physical exams. Life Insurance, on the other hand, may require a physical exam and more extensive medical information.
  3. Accidental death coverage is more about taking care of your family during a time when they are going through a difficult time, while Life insurance can be used for retirement savings or monthly income.
  4. Accidental Death Insurance pays out the face value of the policy if one person passes away from an accident, typically to help with funeral costs and other expenses related to death. Life Insurance pays out the face value of the policy if one person passes away from an illness or natural causes.
  5. Accidental death coverage is really about protecting your loved ones from unexpected expenses after you’re gone, so they don’t have to worry about that. Life insurance can also be used as protection for people with bad health in the family to make sure they are taken care of if something like cancer or Alzheimer’s hits them.

Conclusion

Accidental death insurance is not always needed as many people have life insurance that will cover accidental deaths, so it’s important to check what your policy covers before buying accident coverage. Sometimes you may need to buy additional coverage if your life insurance policy doesn’t cover accidental deaths. The benefits of this are that it’s typically cheaper than buying a separate policy for the same thing, there is no waiting period before providing a payout, and these policies can be taken out regardless of age or health status.

Accidental death plans are usually handled by the business that provides life insurance (or retirement plans, etc.) and is typically paid for annually. This policy is not needed unless you have a specific need to protect your family financially in case of an accident or death.

References

  1. https://www.sciencedirect.com/science/article/pii/S0140673697063642
  2. http://mshf.on.ca/images/documents/LifeInsuranceFactSheet.pdf
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