Wednesday, February 10, 2010

When is a Death Benefit (not) a Death Benefit?

Most life insurance policies pay a death benefit when one dies, regardless of cause (absent fraud, of course). Some plans include an "accidental death" rider, which doubles the amount paid in the event of death due to an accidental injury.

[ed: I've never understood the appeal of such a rider: how likely is it that a surviving spouse needs twice as much money if one's hit by a bus instead of dying slowly of cancer?]

And there are some policies which only pay if one dies an accidental death: called "accident plans," these are usually inexpensive (for good reason) because they don't have to pay out after, say, a long and expensive illness. Again, I fail to see the value in such plans, but folks do buy them.

Which brings us to the topic at hand: what, exactly, defines an "accidental death?"

"Your spouse goes into the hospital for surgery and winds up dead ... Are you entitled to collect?"

According to a judge in New York, "yes." In this case, a woman went in for surgery, the gas-passer screwed up, and she died of complications. The judge determined that this met the definition of "accidental death."

His is not the last word: other jurisdictions have ruled the opposite.

What do you think?

(Poll open until 2/28/10)

[Hat Tip: FoIB Fred W]
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