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Accidental death and dismemberment Insurance

Accidental death and dismemberment insurance (AD&D) is a policy that covers not only death but also life-altering injuries, like the loss of a limb, which makes it different from standard life insurance. Unlike life insurance, it covers only accidents. That often makes it more affordable, since AD&D insurance doesn't cover all causes of death. It also means it's a far more limited form of coverage, but can be a very useful one.

Many companies offer their employees AD&D insurance as part of their benefits package. These supplemental AD&D insurance policies don’t offer as much coverage as a policy on the private market but often come at no cost to you.

Below we’ll help you decide if AD&D insurance is worth it and the difference between a life insurance policy vs. accidental death and dismemberment insurance.

Key takeaways

  • Accidental death and dismemberment insurance (AD&D) pays out when the policyholder dies or is severely injured in an accident.
  • AD&D insurance only covers accidents, not natural death or death caused by an illness.
  • You can purchase AD&D insurance as a separate product or endorsement on your life insurance policy, and many employers offer it as a benefit.

What is accidental death and dismemberment insurance?

AD&D is a limited form of insurance that covers only accidents. It pays out if the policyholder dies or suffers one of a specific list of injuries, such as the loss of a limb.

You can purchase accidental death and dismemberment insurance as a standalone policy or add an accidental death rider to your life insurance. This rider increases the death benefit for accidental death, usually doubling it.

AD&D insurance isn’t a replacement for life insurance. The coverage is limited to accidents and won’t pay out for any other cause of death. AD&D is also not a replacement for disability insurance; again, it only covers specific types of accidents and not other causes of disability.

What is covered by accidental death and dismemberment insurance?

An AD&D policy generally covers fires, accidents involving work-related machinery, poisoning, falls, suffocation, choking and drowning. Your policy also may cover dismemberment (partial or total loss of a hand, arm, or another body part), paralysis, and loss of sight, speech, or hearing. 

Per Friedlander, AD&D also safeguards in the event of injuries or death that result from an accident that occurs while riding on a bus, train, commercial airplane, ferry, cruise ship, taxi, or other common transport.

Optional coverages sometimes include hospital stay coverage due to an accident and spouse and child AD&D coverage.

Some insurers offer other optional benefits as part of an enhanced AD&D plan, too, including benefits for:

  • Accelerated death
  • Accident hospital income
  • Adaptive home and vehicle
  • Anti-inflation
  • Bereavement counseling
  • Coma
  • Common disaster
  • Critical burn
  • Daycare
  • Funeral expense
  • HIV occupational accident
  • Loss of use
  • Newborn
  • Newlywed
  • Permanent total disability
  • Rehabilitation

What's not covered by AD&D insurance?

Your injuries or death usually must occur within a few months of the accident date to receive benefits related to an accident. Also, you will only collect benefits if your death or injuries are proven to be direct results of the accident.

There are also several common exclusions, including:

  • 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.

What are the exclusions in AD&D policies?

Friedlander says standard exclusions in AD&D policies include:

  • If an injury occurred before the coverage effective date
  • Death caused by illnesses, including mental illness, suicide or self-inflicted injuries
  • Drug overdose
  • Death or injury while driving under the influence of alcohol or drugs
  • Death or injury from voluntarily inhaling gas or taking poison
  • Death or injury while committing a crime
  • Death or injury while participating in a riot, civil disturbance, or suffered during an act of war
  • Injuries while serving in the U.S. Armed Forces
  • Death or injury from car racing, flying a plane, playing professional sports, or participating in extreme lifestyle activities such as scuba diving and skydiving.

How does AD&D insurance work?

Accidental death and dismemberment insurance pays a lump sum in case of a covered accident.

“Specifically, these covered accidents are incidents that could not be foreseen and are fatal or dismembering,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute in St. Johns, Florida.

AD&D benefits are paid as a single payment. After processing an AD&D claim, your insurance carrier will pay out the coverage amount in one lump sum.

“That means you or your loved ones will get all the money at once when it is needed most – without having to wait,” Friedlander says.

AD&D insurance pays living benefits differently depending on the injury. If you lose one limb, you may qualify for 50% of your policy coverage amount. You might be eligible for 100% of your policy coverage amount if two or more limbs are lost. Coverage amounts for partial or complete paralysis vary but are usually 25 or 50%.

The plan provider sets coverage limits for AD&D policies. AD&D plans can include a benefit reduction schedule based on age (which can vary by plan). According to Friedlander, typical limits are:

  • 35% at age 65
  • 60% at age 70
  • 75% at age 75
  • 85% at age 80

How do you get AD&D insurance?

Typically, AD&D insurance is provided as part of a comprehensive employee benefits package given to workers at no cost to the employee.

“More than 80% of US employers offer this benefit to their staff. However, if a company plan does not cover you, you can shop for individual coverage through an insurance professional who can provide you with multiple quotes from various insurers,” Friedlander says. “AD&D can also be sold as an endorsement or rider to a life insurance policy that doubles the death benefit paid to your survivors if you die due to an accident.”

To be eligible for AD&D benefits, you must be an active plan participant with earned eligibility at the time of your loss. Your AD&D coverage expires when you lose this earned eligibility.

For example, AD&D benefits are unavailable if you are a former employee on COBRA coverage, nor are these benefits available to dependents.

“Anyone should qualify for this type of policy so long as they are between the ages of 18 and either 70 or 80, depending on the carrier,” says Amber Benka, an insurance agent with California Commercial Insurance.

Where to buy AD&D insurance

You can buy accidental death and dismemberment insurance as a separate policy or rider on a life insurance policy.

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

Accidental death and dismemberment 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.

Some employers offer AD&D insurance as a part of their benefits package. This may be at no cost to you, or you may be able to get it for a low monthly rate. Group rates for insurance are usually lower than buying coverage on the private market.

Do you need accidental death and dismemberment insurance?

So, should you get accidental death and dismemberment insurance? An AD&D policy may be a good idea, especially if you work in a high-risk job, such as a firefighter. People with riskier jobs pay higher premiums than people with low-risk employment.

Supplemental AD&D coverage could be a wise investment, but remember that AD&D doesn't cover you for non-accident death. Think of AD&D insurance as a supplemental policy to your life and disability insurance policies. 

Pros and cons of AD&D insurance

There are both advantages and disadvantages to AD&D insurance.

Pros:

  • Covers dismemberment. This isn’t covered by life insurance.
  • It’s inexpensive. "This coverage is cheap in comparison to conventional life insurance and is often offered at little or no cost as part of an employer-sponsored benefits package," says Brian Martucci, the Minneapolis-based finance editor for Money Crashers.
  • No medical exam. Most life insurance policies do require an exam.
  • There’s no waiting period. Coverage takes effect right away.

Cons:

  • It only pays for covered accidents. There is no coverage for illness or natural death.
  • Benefits may be reduced based on age. Benefits may be reduced by up to 85% by the age of 80.
  • Coverage through an employer will terminate if you leave the job. If your AD&D is an employee benefit, you will lose coverage if you change jobs.

Are there additional accidental death and dismemberment insurance benefits?

An accidental death and dismemberment policy can serve as a nice supplement to term or permanent life insurance coverage. But additional benefits may apply, too.

First, your policy may also provide living benefits compensation for injuries incurred due to particular types of accidents, like paralysis, loss of a foot, hand, leg, or arm, and blindness.

"If you lose one limb, you may qualify for 50% of your policy coverage amount. If two or more limbs were lost, you may qualify for 100% of your policy coverage amount," says Friedlander. "Also, the amount paid to you as living benefits may not be deducted from your policy's coverage amount, which may remain in full effect to help cover future injuries or death."

You may also qualify for up to triple payout on common carrier accidents.

"If you are injured or killed in an accident while riding as a fare-paying passenger on a bus, train, commercial airplane, ferry, cruise ship, taxi, or another type of common carrier, you may be entitled to double or even triple the coverage amount of your AD&D policy," Friedlander continues.

Note that some insurers provide an extra payout if you were wearing a seat belt during an accident that ended in death or injury.

"Additional benefits may also be provided to help your children pay for higher education, and counseling, legal, and financial advice for beneficiaries may also be an included extra benefit for a surviving spouse," says Chavez.

Should you get accidental death and dismemberment insurance?

While anyone may benefit from AD&D coverage, good candidates include those who have jobs or pastimes that involve higher risk.

"People with risky hobbies or occupations are more likely to die or suffer serious injuries and accidents that are covered by AD&D policies," explains Martucci.

Got a beneficiary like a spouse and/or children who may be vulnerable to financial distress in the event of the loss of your life or limbs? If so, accidental death and dismemberment insurance "can be an affordable way to supplement your life insurance or medical coverage if you are seriously injured or die as a result of a covered accident," Friedlander says.

Be aware that if you have a riskier job, you will likely pay higher premiums than those with lower-risk vocations.

You may be wondering: Do I need both life insurance and AD&D coverage? Regardless of your risk status, Chavez says you should still have life insurance.

"And if you fear that you will become disabled, you should probably purchase a separate disability insurance policy so that you can be sure to receive benefits if you are unable to work," recommends Chavez. "Consider AD&D insurance as a supplement to your life and disability insurance policies; it can play a crucial role, but it's wise to think of it as additional protection rather than relying solely on AD&D coverage."

Frequently asked questions: AD&D insurance

Is accidental death and dismemberment insurance worth it?

AD&D coverage is a no-brainer if it’s offered at no charge through your employer. But if you have to purchase coverage on your own, it pays to crunch the numbers and consider alternative forms of insurance.

"The good news is that accidental death and dismemberment insurance rates can be much lower than your average life insurance rates. But if you are young and healthy, you may be able to get a comparably good rate for term life insurance," says Chavez.

If you have a risky occupation or hobby or travel frequently, this coverage could be worth the cost.

"For homebodies who are quite unlikely to die or get injured accidentally, it's probably not worth it," Martucci says.

What's the difference between accidental death and dismemberment insurance vs. life insurance?

Life insurance policies typically cover the vast majority of deaths.

Accidental death and dismemberment insurance is much narrower in scope: It only covers certain kinds of accidental death and certain injuries that result in the loss of use of your body parts, like eyes and limbs.

Is a heart attack considered an accidental death?

No. A heart attack death doesn't qualify for AD&D benefits as it’s not an accident; it’s considered a natural cause of death.

"Accidental death and dismemberment policies generally don't cover cardiac arrest caused by trauma, surgical complications, drug overdoses, or other unnatural causes either," Martucci says.

What is supplemental AD&D insurance?

Supplemental AD&D insurance is an optional level of group coverage that pays out clearly defined cash benefits if an accident results in death, blindness, or the loss of one or more limbs, according to Friedlander. He says not all employers offer this optional coverage for group plans, but you may be able to purchase AD&D coverage from a private insurance provider.

What is voluntary life and AD&D insurance?

Voluntary group AD&D insurance is coverage that is offered by your employer but is an option you can either choose to purchase or decline.

Voluntary spouse AD&D coverage covers the insured’s spouse on the same policy, usually for an additional fee.

How much AD&D insurance do I need?

Like life insurance, AD&D insurance coverage needs vary. Consider things like lost income, funeral costs, and the costs of necessary adjustments to your home if you are paralyzed or lose a limb. It’s best to speak to an insurance agent or financial advisor to determine how much coverage you need.

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