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LIFE Insurance

Accidental death and dismemberment insurance (AD&D) sounds like a low-cost boost to life insurance. Is it worth the money, or should you simply buy more life insurance?

Accidental death and dismemberment Insurance (AD&D) can help your family if the unthinkable happens. AD&D coverage kicks in if you die in a fatal accident or become disabled. There are exemptions, though. 

Many companies offer their employees free AD&D insurance as part of their benefits package. These policies provide assistance, but it's often for smaller coverage than if you bought an AD&D insurance policy yourself. 

Let's take a look at AD&D insurance, what it covers, what it doesn't cover and how to get a policy. 

What is AD&D insurance? 

AD&D insurance pays you or your beneficiaries a set amount of money if your death or dismemberment is the direct result of an accident. AD&D is a limited form of insurance that covers you only in accidents. However, there are coverage restrictions that make accidental death and dismemberment insurance far less useful.

You can also add an accidental death rider to your life insurance. If, for example, you had a $100,000 life insurance policy and you added an accidental death rider and you're killed in a covered accident, your beneficiaries would get a total of $200,000 from your life insurance and the rider. The fact that it can pay twice as much as normal is why it's sometimes called "double indemnity."

You shouldn't consider AD&D insurance as a replacement for life insurance. AD&D coverage is limited to accidents. It doesn't provide the kind of coverage you find in life insurance. AD&D is also not a replacement for disability insurance.  

What Does AD&D insurance cover?

AD&D insurance covers accidental death and dismemberment. What does this mean?

In the event of a fatal accident or an accident that results in you losing your eyesight, speech, hearing or a limb, AD&D will pay you or your beneficiaries a specified amount. However, there are restrictions and exclusions. To receive benefits related to an accident, your injuries or death usually must occur within a few months of the accident date. Also, you will only collect benefits if your death or injuries are proven, direct results of the accident.

Dismemberment coverage works on a "per-member" basis. If you lose one member (a hand, foot, limb, sight in one eye, speech or hearing), the insurance company will usually pay 50% of the full benefit. If you lose two members, you will receive the whole benefit. Coverage amounts for partial or complete paralysis vary, but are usually 25 or 50%.

Optional coverages sometimes include hospital stay coverage after an accident, and spouse and children coverage.

What does AD&D insurance not cover?

Typical exclusions of AD&D coverage include:

  • Death during surgery
  • Death resulting from a mental or physical illness
  • Bacterial infection
  • Hernia
  • Drug overdose
  • Skydiving
  • Car racing
  • Drunk driving
  • War

Make sure to read the fine print when applying for AD&D coverage. 

Where to buy AD&D insurance

You can generally purchase accidental death and dismemberment insurance as a separate policy or as a rider (endorsement) on a life insurance policy.

Major insurers typically issue AD&D policies and can also be purchased through credit card offers or credit unions. Some life insurance companies may include or offer AD&D in their group insurance plans.

What does AD&D insurance cost? 

Depending on the amount of coverage purchased and the benefits it provides, AD&D insurance premiums can cost as little as $60 per year.

The low cost of accidental death and dismemberment insurance also means it doesn't provide much benefit. In fact, it usually only provides a small amount of peace of mind. It's generally more cost-effective to put the money you'd be paying toward the premium into a standard life or other insurance policy instead.

Also, employers often offer AD&D insurance as a part of their benefits package. These group policies usually have lower benefits than individual policies. They're often limited to employees, so they're nice to have for that price, but you lose that coverage when you change jobs or if the employer drops it. 

Will AD&D insurance really help? 

An AD&D policy may be a good idea, especially if you work in a high-risk job. People with riskier jobs pay higher premiums than people with low-risk employment. 

Supplemental AD&D coverage could be a wise investment regardless, but understand that AD&D doesn't cover you for any type of death or dismemberment. You should still have life insurance to cover you in case of death. If you're concerned about becoming disabled, you should get a separate disability insurance policy so you're assured you'll receive benefits if you're unable to work. 

Think of AD&D insurance as a supplemental policy to your life and disability insurance policies. supplemental AD&D can play a critical role, but it's wise to think of it as added protection rather than sole relying on AD&D coverage.