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Accidental death and dismemberment insurance (AD&D)

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Accidental death and dismemberment Insurance (AD&D) can provide benefits, but is it worth it? The additional cost and limited protection offered by accidental death and dismemberment insurance make its purchase difficult to recommend. You may want to consider also evaluating how AD&D compares to other types of life insurance, such as term life insurance and permanent life insurance.

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About Accidental Death and Dismemberment 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. However, there are coverage restrictions that make accidental death and dismemberment insurance far less useful.

An accidental death policy or rider (minus dismemberment coverage) is a similar policy. If, for example, you had a $100,000 life insurance policy and you added an accidental death rider, and you were 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."

AD&D is a limited form of insurance that covers you only in accidents. 

What Does AD&D Insurance Cover?

AD&D insurance covers exactly what its name states: 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 percent 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 percent.

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, resulting from a mental or physical illness, bacterial infection, hernia, or a drug overdose. In addition, many policies do not cover "risky activities," such as skydiving, car racing, and involvement in a war. "It is important to read the fine print when applying for this kind of policy. While it may seem like you're getting better and more adequate coverage, in reality, you're probably not," says Belden.

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 basic life, health or other insurance policy. AD&D policies are typically issued by major insurers and can also be purchased through credit card offers or credit unions. Some life or health insurance companies may include or offer AD&D in their group insurance plans.

Is Accident Protection Worth It?

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.

Will It Really Help?

If it's very likely that you'll die or become dismembered as the direct result of an accident, an AD&D policy may be a good idea, although you may have a higher premium if you're at high-risk because of your occupation or activities. Having additional coverage doesn't hurt, but realize that an accidental death and dismemberment policy is extremely specific and thus unlikely to pay a benefit. If you already have a life insurance policy, purchasing a larger benefit amount might not cost much more, and it will cover more circumstances with fewer exclusions.

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