Insurers make the world riskier?

accidents are sudden, while most deaths are slow and painful. that’s the difference methinks. the financial need in this case could vary, as a function of time.

Eh, it’s probably true of a lot of types of insurance. While any loss, even a fully insured one, is a massive hassle to deal with, the presence of insurance does decrease the deterrents.

Life and Medical insurance reduce the risks of smoking and over-eating.

Car insurance reduces the risk of drunk driving.

Dental insurance reduces the risk of not flossing.

Homeowner’s insurance reduces the risk of burning candles or using your fireplace or smoking in bed (which is apparently responsible for a surprisingly large share of house fires).


Right off the bat, they assume insurers are supposed to prevent loss. So. Strawman right there.
It certainly deserves an FJM-style beatdown, but I’m busy. (Back to watching King game.)

Nah. Aneurysms kill young and otherwise healthy people pretty quickly, as do suicides, and neither triggers accidental death payouts.

With an aneurysm you basically just drop dead. One minute you’re fine and the next you’re dead.

I’m not saying illnesses can’t kill you instantaneously. But most deaths are not sudden.

Not that I think anyone is getting accidental death coverage voluntarily, but that you can build a base that accidental death coverage is at least different from life

Most? Maybe not. But an awful lot are.

Huh? Of course they are. Employers offer Additional or Voluntary AD&D* coverage all the time, and find me an individual life insurer who doesn’t offer an optional accidental death rider.

And someone in the employer’s HR department is making the decision to buy the AD&D insurance.

It’s popular because it’s cheap. It’s cheap because most people don’t die in accidents. And accidental dismemberment is even rarer. And don’t equate “cheap” with “a good value”. It’s a pretty high margin / low loss ratio product.

*Accidental dismemberment is another uninsurable risk: get disability and medical insurance to cover your potential financial losses from dismemberment.

I don’t understand what this means.

I mean to say. You can argue accidental death coverage offers additional assistance in the event of an accidental death, which is more instantaneous than both deaths, and sudden deaths are more financially strenuous than slow deaths.

At least that’s the pitch

That’s the pitch, but it’s false to the point of being exploitative.

don’t get started with warranties

Most people don’t die in accidents, but accidents are the leading cause of death for younger people. I’m someone who appreciates being able to get $1.5 million in life coverage for the thing that is most likely to kill me right now for dirt cheap, and I buy as much of it as I can through my employer.

I’m terrified of flying because of the chance I’ll die in a plane crash. Realistically I know that I’m more at risk of dying from pretty much anything else, but I would pay money for a policy that pays extra to my family if I die in a plane crash, if offered to me. Is it a play on my emotions? Sure, but not all choices about risks are logical.

Accidents might be the leading cause of death, but they account for well under half of deaths. You are more likely to die of natural causes than you are to die in an accident and if you are counting on the AD&D money being there for your family in the event of your untimely death, most likely it won’t be. Especially during a pandemic.

But 2 seconds of Googling yielded 2018 numbers which was obviously don’t include Covid deaths.

For ages 25-44 (which I think includes you) accidents are 33.17% and homicide (which also triggers an AD&D payout even though it’s definitionally not an accident) is another 6.49%. If you’re not dealing drugs nor in a gang your chances of dying by homicide are MUCH lower, though… that’s for the whole population and drug & gang activity accounts for the lion’s share. If your marriage is good that further lowers your risk since spouse-on-spouse homicide is also a significant share of the total.

And a lot of those accidents are young men being dumbasses… so as a non-dumbass your chances of dying in an accident are really much lower too.

Even not taking into account that your individual risk of dying in an accident as a college-educated mother with a responsible job is much lower than the average 25-44 year-old’s… you’re still looking at well under 50% of deaths among age 25-44 year olds that would trigger an AD&D payout. Less than 40% actually. And your personal risk is much lower than that.

Buying AD&D insurance is very much like buying lottery tickets. It’s probably not going to pay out, even if you die.

Put more simply: there’s a reason the insurance is cheap and it’s not because the actuaries pricing it are idiots.

Well you’re in luck because a lot of employer-sponsored AD&D insurance does have a “common carrier” benefit that does pay extra in the event you die in an accident involving public transportation (city bus, subway / light rail, Amtrak, commercial airplane, cruise ship).

And it’s because of the irrational emotions that stuff like this exists because again… how can it possibly matter to your family’s financial situation whether you die in a plane crash or in a car accident on the way home from the airport? If anything the airline will pay a wrongful death payout and they’ll get more even without the “common carrier” benefit.

But it’s cheap and it sounds nice, so it’s a thing.

Same thing with Critical Illness insurance. What if you get a disease not covered by the policy? Doesn’t matter… there’s a few that people are scared of, so that’s what they want covered. Not the stuff they haven’t heard of. That doesn’t matter.

Or perhaps I’m looking at it from the angle of, I want to take all the opportunities available to me to provide for my family after I’m gone, and AD&D provides a lot of money for a very small premium, so why not get it?

My family will be less well off if I die from cancer, but that’s not a reason to not try to provide for them if I die in a car accident. Why would I choose to have less coverage in that event just because I don’t have that same coverage for all death?

Emotionally charged decisions may not always be mathematically sound, but they also are not a flaw in the system; they are what make us human.

Not everyone can afford or can get access to term life coverage. AD&D provides some coverage at an affordable cost to those people. Is it better for them to have zero coverage instead of some? I doubt many people are getting AD&D and then thinking they have no need for anything else.

None of them are, it’s a whole bunch of utility theory.

Nevertheless, insurance should be purchased based on a loss, in this case a loss triggered by your death. That loss is going to be triggered (and thus insurance required) IF you die, not HOW you die. that’s the problems with AD&D, it doesn’t provide coverage in most cases - it’s playing on the fears that people are going to die in a car accident when the stats show exactly the opposite.

Still, if you’re an insurer, this is good stuff because money. 25 years ago I started at an insurer where they’d done a direct mail campaign selling AD&D that had a 15% success rate. Management was ecstatic at the results, and were quite open with the fact that it was the most profitable line of business in the entire company (not that that’s a reason not to buy it).

I would pay money for a policy that pays extra to my family if I die in a plane crash

If I recall correctly, Accidental death started with trains; people didn’t trust them and figured they’d die. Enter AD&D - buy a policy just before your train ride.

I feel like you could make a pretty decent business selling AD insurance limited to plane crashes at the airport. $99 for $250K of coverage, coverage good for 24 hours from time of purchase.Hell, I don’t even agree with AD&D but at that price I might play the lottery.

1 Like

I think a crap ton of people overestimate their chance of dying in an accident and underestimate their chance of dying from natural causes.

And I think a lot of people buy AD&D insurance for protection when the reality is that it’s basically a lottery ticket.

I was a reserving actuary for speciality health and life products for several years, including AD&D, critical illness, hospital, and other strange coverage. I know the pricing actuaries aren’t idiots. I also know all of them still chose to elect the coverage for themselves. Shrug.

Probably because it was cheap lottery, not because it was a rational insurance decision. That’s fine, we all do that. It’s just not proper insurance.

1 Like