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 insurance (AD&D). It’s a common perk for many companies to offer, and is also available to you as an individual. But what does this mean and how does it benefit you? Let’s take a look at AD&D insurance in depth.

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

What is 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 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, for example, of $10,000.

AD&D policies don’t require a medical exam, so they can be a good option for people with underlying health conditions who can’t get approved for life insurance. There are few requirements, and it is generally easy to receive approval for coverage.

How does AD&D insurance work?

Let’s say you are killed in an accident, and that you had an accidental death & dismemberment policy through work for $100,000 in coverage. Your beneficiary should receive that entire amount. If your accident causes the loss of one leg, you will receive a partial payout, probably around 50%.

Let’s assume that 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, of $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 paid vehicle.

If you can afford only one kind of policy, most insurance professionals would 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’s great 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’ll 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 their 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

Do I need accidental death and dismemberment insurance?

An AD&D policy is not necessary for everybody, especially if you have a solid life insurance policy already in place. If you do, but want 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 — most deaths are due to illness or some other cause.

AD&D policies should not be a substitute for life insurance, unless you are unable to get a life insurance policy due to an underlying health condition. If that’s the case, an AD&D policy is 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?

Probably not, although it’s worth talking about it with your agent. 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.

How is AD&D calculated?

Every insurer will differ in this respect, but generally, your policy will pay out 100% for your death. If you are dismembered, the policy will pay out on a per-member basis. For example, loss of one eye might be worth a 25% payout, both eyes could be 50%.