The bridge collapse in Washington in late May was the topic of a recent water cooler conversation. One person commented that he travels by car a lot for work and crosses hundreds of bridges every week.
Whenever disaster strikes, it attracts the public’s attention and then the focus turns to the next crisis. However, there is no doubt that there is legitimate cause for concern regarding our country’s infrastructure and the state of disrepair of many bridges.
Back in 2011, a report from Transportation for America indicated there were more than 70,000 structurally deficient bridges in the United States, and the federal government said they needed to be substantially repaired or replaced.
This topic is near and dear to me because this month marks the 30th anniversary of the Mianus River Bridge near Greenwich, Conn. A 100-foot section of the bridge collapsed on June 28, 1983, killing three people.
I was working in New York in those days. I had gone to an evening graduate school class and drove over the bridge about three hours before it collapsed. Four years later, I drove over the Schoharie Creek Bridge on the New York State Thruway just two days before it collapsed.
Tragedies like these prompt some people to consider their mortality and what would happen to their families in the event of their death.
One particular coverage, or rider, that people consider is accidental death & dismemberment coverage, which pays beneficiaries typically double the face amount of the policy if they die as a direct result of an accident. Usually the policy requires a three- to six-month timeframe.
For example, a $100,000 life insurance policy with an accidental death rider would pay $200,000 to beneficiaries if the insured was killed in a covered accident. These policies are often referred to as “double indemnity” because the payout is twice the normal amount.
While this type of protection is inexpensive, the reality is that most people die from causes other than accidents. Also, the family’s need for replacement is not a function of how the person dies—it is a function of when the person dies relative to the ages and needs of the beneficiaries.
Still, there is a bit of adverse selection that can come into play. If someone flies commercial on smaller planes or drives long distances frequently, AD&D can be a good value.
From an agent’s standpoint, the notoriety given to accidents and disasters can motivate an unmotivated person to consider buying insurance. If these types of events are the catalyst for someone purchasing life insurance, don’t overanalyze the client’s rationale for doing it. Sometimes achieving the overall objective is more important than spreadsheets and assumptions.
Hopefully, the insured will be around for a long time to utilize the cash value for another purpose—like additional income in retirement.
Dave Evans is a certified financial planner and an IA l-h contributing editor.