Accidental death and dismemberment (AD&D) insurance is insurance—usually added as a rider to a health insurance or life insurance policy—that covers the unintentional death or dismemberment of the insured. Dismemberment includes the loss—or the loss of use—of body parts or functions (e.g., limbs, speech, eyesight, and hearing).
Because of coverage limitations, prospective buyers should carefully read the terms of the policy. For instance, AD&D insurance is limited and generally covers unlikely events. Also, it is supplemental life insurance and not an acceptable substitute for term life insurance.
What Is Accidental Death and Dismemberment (AD&D) Insurance?
Accidental death
In the event of an accidental death, this insurance will pay benefits in addition to any life insurance but only up to a set amount total regardless of any other insurance held by same insurer, held by the client. This is called double indemnity coverage and is often available even when accidental death insurance is merely an add-on to a regular life insurance plan. Some of the covered accidents include traffic accidents, exposure, homicide, falls, heavy equipment accidents and drowning. Accidental deaths are the fifth leading cause of death in the U.S.[1] as well as in Canada.
Accidental death insurance is not an investment vehicle and thus clients are paying only for sustained protection.
KEY TAKEAWAYS
- Accidental death and dismemberment (AD&D) insurance is usually added as a rider to a life insurance policy.
- AD&D insurance pays benefits in the case of a person’s accidental death or dismemberment, which is the loss—or loss of use—of body parts or functions.
- AD&D insurance usually comes with significant coverage limitations, so always read the fine print.
- AD&D does not pay if the insured died due to natural causes, such as cancer or heart disease.
- Known as double indemnity, AD&D may pay a benefit equal to or a multiple of (usually 2x) the regular insurance’s face amount.
Accidental Death And Dismemberment Insurance
Understanding Accidental Death and Dismemberment (AD&D) Insurance
AD&D insurance contains a schedule that details the terms and percentages of the various benefits and covered special circumstances. For example, if an insured dies from injuries sustained in an accident, the death must occur within a specified period for benefits to be paid.
Accidental Death
When adding an AD&D rider, also known as a “double indemnity” rider, to a life insurance policy, the designated beneficiaries receive benefits from both in the event the insured dies accidentally. Benefits typically cannot exceed a certain amount. Most insurers cap the amount payable under these circumstances. As most AD&D insurance payments usually mirror the face value of the original life insurance policy, the beneficiary receives a benefit twice the amount of the life insurance policy’s face value upon the accidental death of the insured.
Typically, accidental death covers exceptional circumstances, such as exposure to the elements, traffic accidents, homicide, falls, drowning, and accidents involving heavy equipment.
What Is Accidental Death and Dismemberment (AD&D) Insurance?
Insurance?
As the name suggests, accidental death and dismemberment insurance provides coverage for a death due to an accident. It generally also pays if you lose a limb or a function such as sight, hearing or speech in an accident.
Typically, the beneficiaries you name on your policy will receive a lump-sum payment if you die in an accident.
For example, an AD&D policy might pay 50% of the coverage amount you purchase if you lose one thing—for example, a hand, foot or sight in one eye—and 100% if you lose two or more things. And policies might pay 50% to 100% of the benefit amount for paralysis as a result of an accident.
The amount of coverage you can get will depend on limits set by insurers or by employers that offer AD&D insurance as a workplace benefit. For example, you can purchase an AD&D policy from Farmers Insurance with a benefit ranging from $37,500 to $200,000.
What’s Covered by AD&D Insurance?
AD&D insurance will cover only deaths and injuries from accidents—not natural causes or illnesses. Not heart attacks or strokes. Policies typically cover death or injuries from accidents at work, home and while traveling.
In addition, if your death is the result of an accident while traveling on public transportation, including a bus, train or airplane, the payout can be double or triple the amount of your base coverage. The policy will outline the rules.
Are There Additional AD&D Insurance Benefits?
Some insurers will pay an additional benefit if you were wearing a seatbelt during an accident that led to an injury or death. Counseling, legal and financial advising services for beneficiaries can be added benefits for a surviving spouse, too. These options will vary by insurer.
What’s Not Covered by AD&D Insurance?
“The definition of accident could be subjective,” says Jon Voegele, chair of Life Happens, an industry-funded organization that provides consumer education.
Policies tend to have a long list of situations when death or injury wouldn’t be covered. of these exclusions are common in AD&D policies.
Benefits are not payable for:
- Injury incurred prior to coverage
- Death caused by illnesses, including mental illness
- Suicide or self-inflicted injuries
- Drug overdose
- Injuries while serving in the armed services
- Death or injury from car racing, flying a plane, playing professional sports or participating in extreme sports such as sky-diving and scuba-diving
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What Is Accidental Death and Dismemberment (AD&D) Insurance?
How Can You Get AD&D Insurance?
If you work for a company, there’s a good chance your employer offers AD&D insurance as part of its benefits package. According to the Society for Human Resource Management’s 2019 survey of employers, 83% said they provided this insurance as a benefit to employees in 2019. AD&D insurance is one of the most commonly offered workplace benefits among those surveyed.
Some employer group plans also allow employees to insure their spouse and children.
A few insurance companies such as AIG Direct, Farmers Insurance and Mutual of Omaha sell individual AD&D insurance policies. Online companies such as Fabric make getting an accidental death policy fast and easy. You can apply for and get coverage instantly, says Allison Kade, editorial director of Fabric. (Note that Fabric’s policy covers only death, not dismemberment.) You also could work with an insurance agent that can compare policies to find the best one for your needs.
Accidental death coverage also can be sold as a rider, or add-on, to life insurance policies. The coverage can double what your life insurance payout would be if you die as a result of an accident.
How Much Does It Cost?
Rates for AD&D insurance tend to be lower than rates for traditional life insurance because the coverage is limited to accidents. And if your employer offers AD&D insurance, you might be able to get a basic amount as a free benefit.
In general, AD&D insurance premiums are tied to the amount of coverage you purchase. For example, monthly premiums might start at $4.50 for every $100,000 in accidental death coverage from Farmers. Rates start at $6 a month for $100,000 of coverage from Fabric and rise to $30 a month for $500,000 of coverage. Because rates can vary from insurer to insurer, it can pay to shop around for the best rate.
Pros and Cons of AD&D Insurance
Some people mistakenly think that having AD&D insurance is a financial safety net if someone dies unexpectedly. “It gives them a false sense of security,” Voegele says. Because AD&D provides limited coverage, it isn’t right for everyone.
Pros
You don’t have to take a medical exam to get AD&D insurance. And you don’t have to answer questions about your health, which can make this type of policy appealing to people with pre-existing conditions that make it difficult to find affordable life insurance.
You won’t be denied coverage because of your health. You just have to meet the age requirements. Typically, you must be between age 18 and 70 or 80.
You can get coverage quickly. Because there are no lengthy questionnaires to fill out, no medical exams to take and no waiting period, you can get approved for a policy within a matter of days or even minutes for some policies purchased online.
Cons
AD&D will only pay a benefit if your loss is a result of an accident – and there are plenty of ways to die other than an accident. This limited coverage is a big drawback.
Coverage isn’t as cheap as it seems.
An AD&D policy can cost less than life insurance. But that’s because the chance of an AD&D payout is relatively low. “The odds of you using it are so far down the scale that it becomes expensive for the payout,” Voegele says.
You might lose your coverage if you leave your job.
Most people who have AD&D insurance get it through a group plan at work, Voegele says. Often, you can’t keep that coverage if you leave your job.