Accidental death & dismemberment (AD&D) insurance

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You may have noticed that the benefits available to you through your workplace include accidental death and dismemberment (AD&D) insurance. It’s a common perk for many companies to offer that is also available to you as an individual. However, few employees are familiar with what this actually means and how it can help. One of the most common questions that HR departments frequently are asked is whether accidental death insurance is worth it.

What is accidental death & dismemberment (AD&D) insurance?

This type of policy covers you if you are killed in an accident, as defined by your insurer. This may include anything from drowning to getting hit by a falling tree. AD&D may be a rider, or endorsement, on an existing life insurance or health insurance policy or it may be a free-standing policy on its own.

You can also receive a partial payment on an AD&D policy if you lose an arm or leg, or the use of your eyes, ears or speech — that’s the “dismemberment” part of the policy.

Generally, your payout is based on counting up what you’ve lost: for example, the loss or paralysis of one leg might result in a 50% payout, the loss of both legs might be 100%.

AD&D looks a little like term life insurance, but it’s not a substitute. AD&D pays only for a limited list of accidents, whereas a term life insurance policy pays out for most kinds of death. Unlike a term policy, AD&D also includes the payout for dismemberment.

Generally, AD&D policies are cheaper than term life insurance, because they are paying out on claims less often. They also often feature lower payouts than term life insurance, especially if they are a free benefit in the workplace. A common policy might have a payout of $10,000, for example.

AD&D policies do not generally require a medical exam, so they can be an option worth considering for people with underlying health conditions who are unable to be approved for life insurance. Although there are few requirements, it is generally easy to receive approval for coverage.

Voluntary AD&D

Accidents (unintentional injuries) are the third leading cause for deaths in the United States, which is especially of importance in the workplace. This is where voluntary AD&D insurance can play a significant role.

Voluntary accidental death and dismemberment (AD&D) insurance is a form of insurance that is popular with those who live or work in the most dangerous jobs. It is an optional coverage that is typically added as a rider to a life insurance or health insurance policy, in order to supplement a traditional life insurance policy. AD&D insurance is different from workers’ compensation, because while workers’ comp is limited just to work, AD&D insurance covers accidents that you have anywhere that could potentially interfere with your ability to earn a living.

Voluntary AD&D insurance provides financial compensation if you experience injury or death because of an accident. If an applicable injury occurs, such as loss of limb, the protections from this policy provide your designated beneficiary with financial compensation. Other qualifying injuries may include loss of speech, hearing or movement.

Not all injuries are eligible for the same payment amount. For example, while death could result in a full payout, you could receive just half a payout for other kinds of injuries, such as permanent hearing loss.

Because voluntary AD&D insurance is limited in its protections, it is generally more affordable than other types of insurance, but like term insurance, it is a type of insurance that needs to be renewed.

How does AD&D insurance work?

In the event you are killed in an accident and you had an accidental death & dismemberment policy with your employer for $100,000 in coverage; your beneficiary would likely receive that entire amount. If your accident causes the loss of one leg, however, you would receive a partial payout — probably around 50%.

For another example, say your AD&D coverage was a rider on your term life insurance policy, which was also for $100,000. Because of a concept called double indemnity, you would receive a double payout in the event of your death, totaling $200,000. If you were injured but not killed, you could receive a payout from your AD&D policy but nothing from your term life insurance.

One interesting note is that many AD&D policies pay out double or even triple if the accident occurs while you are riding as a fare-paying passenger on a bus, train, airplane, ferry, taxi or other form of paid transportation.

If you can afford only one kind of policy, many insurance professionals recommend that you go with term life insurance, since it pays out for a much broader range of instances than AD&D. If you can afford to add AD&D as an additional policy or rider, or if you get it as a free benefit, it can be useful as supplemental coverage.

What does accidental death and dismemberment cover?

AD&D covers accidental death and dismemberment through a variety of causes, including death by a car accident or bus, train, or other vehicle accident, murder, airplane crashes, being crushed by something falling, lightning strike, fire or some other mishap that leaves you dismembered, or is fatal.

However, there are some important exclusions to AD&D policies. These vary from insurer to insurer, so you will want to read your policy over carefully to determine what is and isn’t covered.

In general, the following will be excluded:

  • Death from an illness, such as cancer or diabetes
  • A drug overdose
  • Suicide, or anything that happens as the result of mental illness
  • Car racing, skydiving, or any other high-risk activity
  • War and military injuries or death
  • Driving while intoxicated
  • Bacterial infections
  • Death during surgery
  • Death of a professional athlete during a sporting event
  • If death happens while committing a crime

Which life insurance companies offer AD&D?

Accidental death & dismemberment is available from most companies that offer life insurance, although some only sell policies to employers who then award them to employees as a benefit.

Here are a few of the insurers from whom you can purchase an AD&D policy or endorsement.

  • AIG Direct — policies available for anyone from ages 18-80; policies available for those in high-risk professions such as firefighters and police
  • Insubuy — policies available to individuals or groups
  • TruStage — available for members of credit unions
  • Fabric — approval for coverage available within minutes of applying
  • SunLife — pays 100% of benefit for quadriplegia; 75% for paraplegia
  • Protective — offers AD&D riders to its life insurance policies
  • Aflac — Offers accident insurance for personal use or for employees

Is accidental death insurance worth it?

An AD&D policy may not be necessary for everybody, particularly if you have a solid life insurance policy already in place. If you prefer to add an AD&D policy or rider to it because it gives you more peace of mind, it can be a benefit. But remember it will only pay out if your death or dismemberment is accidental — it does not apply to deaths due to illness or other causes.

AD&D policies are not considered a substitute for life insurance, unless you are unable to get a life insurance policy due to an underlying health condition. If that is the case for you, an AD&D policy may potentially be a solid backup plan. And if your employer offers you an AD&D policy as part of your benefits package, take them up on the offer.

Frequently asked questions

Do I need both life insurance and AD&D?

It really depends on what kind of life insurance policy you have and what your financial goals and planning requires. If your life insurance policy offers adequate coverage for you in the case of death or accidental dismemberment, AD&D may be an unnecessary additional cost. If you’re in a high-risk profession however, it may be worth consideration. Speak with an agent to determine what coverage is recommended for your specific situation.

How is AD&D compensation calculated?

Every insurer will differ in this respect, but generally, your policy will pay out 100% of its value in the event of your accidental death. If you are dismembered, the policy will typically pay out on a per-member basis. For example, loss of one eye might be worth a 25% payout, both eyes could be 50%. Confirm amounts and circumstances with your provider to determine how your policy is structured for compensation.

Written by
Mary Van Keuren
Insurance Contributor
Mary Van Keuren has written for insurance domains such as Bankrate.com, Coverage.com and Thesimpledollar.com for the past five years, specializing in home and auto insurance. She has also written extensively for consumer websites including reviews.com and myslumberyard.com. Prior to that, she worked as a writer in academia for several decades.