Why is Accidental Death & Dismemberment not considered life insurance?

What is accidental death and dismemberment insurance?

Accidental death and dismemberment (AD&D) insurance provides a payout in the event of death or permanent physical injury due to a covered accident. AD&D insurance is very different from traditional life insurance. You may want both life insurance and AD&D insurance depending on your personal needs. For individuals in high-risk jobs or for parents of young children who cannot afford a gap in income due to an accident, AD&D insurance may be particularly important.

What is covered under AD&D insurance?

AD&D insurance is designed specifically to cover accidents. If you are involved in a covered accident, but do not pass away, you could be eligible to receive a living benefit. For instance, if you experience a covered accident that results in the loss of a limb, such as your arm or leg, you may be covered by AD&D. Blindness or loss of hearing would typically count as dismemberment, as would paralysis. The money paid out by an AD&D policy may help you manage the costs of an injury or the loss of income while out of work.

AD&D coverage typically defines an “accident” in strict terms. Accidents that occur while a person is engaged in illegal activities or under the influence of drugs and alcohol will probably not be covered. Similarly, if accidents occur during the practice of a dangerous hobby such as ice fishing, there is a good chance AD&D may not cover them. If you travel to a dangerous place, such as a war zone or unstable country, and are injured, that accident may not be covered either. Finally, accidents that happen as a result of mental illness are also unlikely to be covered by AD&D.

The size of your payout from an AD&D policy following an injury will be a percentage of your total death benefit and will depend on the nature of your injury. For example, if your AD&D coverage had a death payout of $100,000, and you lost your thumb and index finger, you might be paid 25 percent of the death payout, or $25,000. If you lost an arm or leg, you might be paid 50 percent, or $50,000. Certain injuries, such as the loss of more than one limb or quadriplegia, would grant you 100 percent of your AD&D coverage.

Why might you consider AD&D insurance?

Many employers offer AD&D insurance as part of a benefits package. A number of employers offer AD&D for free, allowing you extra coverage for yourself and your loved ones at no extra cost.

Employers may also offer AD&D as a rider for employee life insurance plans. A rider is an additional benefit to your insurance policy. With AD&D coverage, you may be eligible for living coverage if you are permanently injured or a death benefit if you lose your life in an accident. If you have life insurance and AD&D, both may payout if you die in a covered accident.

The other circumstance in which many people first consider AD&D coverage is if they want to buy life insurance but have limited options. AD&D may be a good option because premiums are generally lower than those for life insurance. Another reason people become interested in AD&D is because no medical exam is required, so you can’t be denied coverage because of health conditions.

AD&D coverage may also be beneficial for individuals who work in a job that carries a high risk for serious accidents—including construction, manufacturing, or handling hazardous materials. It is important to closely read your policy to ensure that your occupation is covered and considered high risk. Individuals who spend a significant amount of time each day driving may also want AD&D coverage, since their risk for a serious auto accident is higher than average. Finally, AD&D insurance may be particularly important for people with large families or big financial obligations that would make missing work a huge burden.

Understanding the differences between AD&D coverage and life insurance can be challenging. The distinct features of both types of coverage are outlined in the chart below.

 AD&D vs. life insurance

Learn more and get a free quote for AD&D insurance from TruStage™.