The Differences Between Life Insurance And Accidental Death Cover

Sep 18, 2022 | Life

You might be asking yourself why you would need either life insurance or accidental death cover at all, and if that is the case, then you’re in the right place. In this post, we’re going to help you understand these two insurance products, talk about why they could be necessary for you, and highlight the differences between each.

This way, you’ll be in a position to make an informed choice for your current financial situation, your lifestyle, and the plans that you have for your future.

Starting with the ‘why’ of it all

For the most part, people choose some form of a long-term insurance product so that they can make sure that their family has the funds to pay for their funeral and burial costs, as well as children’s education, rent or bond repayments, groceries, and other expenses that their loved ones would be responsible on their own.

Most of the time, people think life insurance is for those with children, but this isn’t necessarily true. We would argue that if you have any ongoing financial obligations and loved ones, then some form of insurance is necessary. The last thing you want is for your family to be unable to settle your outstanding debt or afford to give you the farewell that you deserve.

Essentially, policies like life insurance and accidental death cover are ways that you can protect your family members from the financial impact of your death.

What life insurance is

Life insurance, which is also referred to as term life insurance, whole life insurance, and life cover, is a policy that pays out a lump sum of money in the event of your death to the person or people you have pre-selected as your beneficiaries.

While this is a comprehensive policy, there is one cause of death that isn’t covered by life insurance and that is suicide. We can’t speak to every life insurance policy out there, because life insurers differ in how they put their policies together, but typically suicide isn’t covered within the first two years of owning the policy. Once the two years (or however long this waiting period is) have passed, death by suicide could be covered.

One of the major differences between life insurance and any other similar type of cover, is that life insurance is generally more expensive. Not to say that you can’t find affordable cover, but because life insurance covers a wide variety of causes of death, the premiums are higher than accidental death cover.

What accidental death cover is

Accidental death cover is much simpler than life insurance in that it only covers you in the event that your death is classified as accidental. For example, your policy would pay out a lump sum of cash to your beneficiaries if you passed away as a result of injuries that you suffered during a car accident or a work-related incident.

Some accidental death policies will also include murder as a cause of death.

What’s the difference?

Life insurance and accidental death cover are often confused because they share a fair few similarities. The biggest difference is that accidental death cover pays out only for death caused by an accident (an unnatural cause), while a term life policy pays out no matter what the cause of death is – with a few exceptions.

Here’s an example of what each policy type will cover. Please keep in mind that policy details will vary, depending on the provider and the level of cover that you choose.

Cause of DeathLife InsuranceAccidental Death Cover
Illness or disease, like TB, heart attack, or cancerYesNo
Accident, like a car accidentYesYes
SuicideYes, but only if the policy has been in effect for long enough (usually two years)No
Complications in surgeryYesNo
Violence, such as gunshotYesYes
Old ageYesNo

Apart from the differences that you can see above, there are a few other ways that life insurance and accidental death cover aren’t the same.

Here’s a brief look at these differences:

  • To get life insurance, you’ll undergo a risk assessment of your lifestyle and health, a full medical exam, and possibly an HIV test.
  • There’s minimal underwriting with accidental death cover because accidents are unforeseen, so factors like your family history of illness won’t have an impact.
  • Life insurance premiums are affected by your assessment results, so for example, if you’re a higher risk due to your family history or lifestyle, then you’ll pay higher premiums.
  • Accidental death cover premiums are more affordable because it is less comprehensive.
  • Life insurance may include different waiting periods for specific causes of death, such as around one year for natural death or two years for suicide.
  • There is generally a very short waiting period for accidental death and cover typically starts immediately.

Two things that neither option covers

It’s super important to keep in mind that while life insurance covers many causes of death, and accidental death cover covers unnatural causes, neither of these will cover you for dread diseases or disability.

Some insurers will give you the option to include cover for dread disease or disability with your chosen policy, but others may require you to take out separate cover.

The main reason for this is because dread disease and disability cover is specifically designed to help you manage the implications while you are still alive. If you’re involved in a work incident that leaves you blind in both eyes, for example, then this policy will provide you with a lump sum of cash so that you have funds to pay for what you’ll need in order to cope.

How to choose?

Our ultimate goal is to ensure that those you leave behind aren’t worse off. Your passing will undoubtedly be extremely difficult and traumatic for them, however the damage that outstanding debts, loss of income, and not being able to afford to give you a proper send off will make this much, much worse.

When it comes to making this decision, we would say that it comes down to two main factors. Firstly, you need to decide which policy will help maintain your family’s current financial standing. And secondly, you need to check which premiums are affordable for you, because if you don’t pay your premiums on a monthly basis, your cover could be cancelled.

We trust that this information will help you choose a plan that will be suitable and give you peace of mind for your family – knowing that they will be financially secure should the unforeseeable happen.

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