How crucial is accidental death and dismemberment coverage in a level-term life insurance policy?
Published 5:00 am Wednesday, March 16, 2022
Dear Dave,
My wife and I both work, and we have been looking at level-term life insurance policies. A friend says it would be a good idea for us to have accidental death and dismemberment insurance, too. Do you agree?
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— Aiden
Dear Aiden,
You both definitely need good-level term life insurance policies. Stick with 15- to 20-year level term life insurance, and make sure that coverage is separate from anything provided by your employer.
Each one of you needs 10 to 12 times your yearly income wrapped up in a policy. If you make $50,000 a year, that means you need a policy with $500,000 to $600,000 worth of coverage. The idea of life insurance is to take the place of income. If you or your wife died, the other could invest the insurance money and replace that lost income.
You do not — I repeat, not — need accidental death and dismemberment (AD&D) insurance. These policies are cheap, but they’re pretty much worthless because of the long list of conditions they won’t pay out for. Most pay out only a small portion in cases of dismemberment, and many won’t pay a death benefit if you die from a medical procedure, health-related issue or drug overdose. The devil’s in the details, and AD&D policies are chock-full of them.
If you have long-term disability insurance in place, which is what I recommend, you can be covered for a substantial part of income lost due to an injury or disability. One study says 25% of today’s 20-year-olds will become disabled by age 67. In my mind, those odds are way too high for you to skimp on long-term disability insurance—especially when it’s very affordable in most cases. If you’re in your prime income-earning years, a permanent disability could derail your dreams of homeownership, paying for your kid’s college or having a dignified retirement.
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I hope this helps, Aiden!
— Dave
Dear Dave,
My fiancé and I are getting married in three weeks, but he lost his job as an experienced HVAC technician at a hospital a few days ago. Do you think we should still go on a honeymoon, or wait until things are more stable? I’m on Baby Step 3 of your plan, and I make $56,000 a year. I also have $7,000 in an emergency fund. He was making $64,000 a year, and he’s on Baby Step 2 with about $10,000 in car debt remaining. We have $3,000 already set aside for the trip, plus another $2,000 we were planning to put toward fixing up his place.
— Corina
Dear Corina,
First, congratulations on your upcoming wedding! I hope you two will have long and happy lives together.
Usually, I’m not a big fan of spending when someone loses a job. But I think your situation is a little different than most. You’re both serious about dumping debt and getting control of your finances. Plus, you’re working together, and you’ve already got a nice chunk of cash parked in the bank. That tells me you’re both wise enough to know the importance of saving.
Your guy can find another job in a couple of weeks, considering his field and experience. Companies everywhere are hiring people right now, and the economy is booming! If he gets out there and really busts it looking for another position leading up to the wedding, I think you two will be fine. He might even be able to work it out to start right after the honeymoon.
You two have some financial padding, his job is an easy one to replace, and his income will be restored soon if he’ll just get out there and make it happen. Go on the honeymoon, and have a wonderful time. God bless you both!
— Dave
Dear Dave,
Should I keep buying dental insurance for my kids, or is it just a gimmick?
— Brenda,
Dear Brenda,
Dental insurance is one of those things where it’s easy to see that the payout is greater than the return. We’ve had dental insurance proposed to us at my company several times as an employee benefit, but when you add up what you pay for it you’ll find you rarely spend that much on dentistry. In many cases, I advise self-insuring for dental care.
Now, there is a dental discount company I highly recommend called 1Dental.com. This kind of thing is worth it. As a member, you get discounted rates on dental work when you visit an in-network provider. I’ve gotten to know the folks behind this organization, too, and they’re great people.
Hope this helps, Brenda!
— Dave
