When shopping for a life insurance policy, you have likely come across the term AD&D, or Accidental Death and Dismemberment. This type of coverage comes in the form of a standalone policy or even a rider on your comprehensive term or whole life insurance. So, what is AD&D and do you need it?
Let’s take a look at what is, and isn’t, covered by Accidental Death and Dismemberment life insurance. We will also see who benefits from these types of policies, and whether buying AD&D is right for you.
What is AD&D Coverage?
Accidental death and dismemberment life insurance is a more cost-effective option than even term life coverage. It can be purchased as a standalone policy – providing basic coverage against a number of accidents – or even as a rider on a whole or term life policy.
AD&D life insurance is much more limited in regards to qualifying events. This means that there are instances in which your death won’t trigger a payout for your beneficiaries. However, AD&D coverage is much less expensive than a comprehensive life insurance policy, so it’s still a budget-friendly option for many.
It’s also a smart rider that can likely be added onto your existing policy, providing you and your beneficiaries added peace of mind.
What is Accidental Death?
The first part of an AD&D policy, of course, is accidental death. This covers a number of circumstances in which the insured dies due to an unforeseen and unpreventable accident. Accidental death is the third leading cause of death in the United States.
Causes of death that are typically covered under an accidental death policy include:
- Unintentional falls
- Motor vehicle traffic deaths
- Unintentional poisoning deaths
Of course, this isn’t a complete list and there are caveats to each of these. In fact, the many exclusions of AD&D coverage is one of the reasons this type of coverage is so cheap: the insurance companies don’t pay out nearly as often and claims are limited.
What is Dismemberment?
If you are involved in an accident that does not kill you but leaves you dismembered, your AD&D policy can be utilized for benefits. This is one of few perks of AD&D coverage over a typical term or whole life policy: you can use the dismemberment coverage after a non-fatal injury.
Payouts involving dismemberments are tiered, based on the injury itself. Every insurance company has its own payout amounts for dismemberment, but you can expect the percentage of benefits paid to directly correlate to the severity and impact of your injuries.
Dismemberment coverage is intended for things like:
- Loss of limb
- Loss of fingers or toes
- Loss of sight
- Loss of hearing
Typically, you’d receive a greater payout from losing total sight than if you lost one eye (or the use of). Similarly, losing both legs would mean more benefits than losing one leg or a finger.
Be sure to read the fine print on your own AD&D policy to see what exactly is covered under your dismemberment coverage, and how much you can expect to receive if an injury were to occur.
What’s Not Covered
Trying to determine exactly which situations are covered under an AD&D policy can be difficult. There are plenty of caveats and fine print that will preclude you or your loved ones from receiving a payout. In fact, it may be easier to talk about what isn’t covered.
Here are a few situations which aren’t covered by an AD&D policy under any circumstances:
- Illness or disease
- Death during surgery
- Drug overdose
- Death due to old age
- Drunk driving accidents
- Death during a risky activity, such as skydiving or car racing
- Death or injury incurred while playing a sport professionally
- Participation in war
There are also many circumstances which are a bit less clear. For instance, let’s say that you died in a car crash, but it turns out that you had a heart attack while driving which caused (or contributed to) the accident. Even though you were killed in an auto accident – a situation often covered by AD&D policies – the insurance company could still deny your claim on the basis of heart disease.
This is just one of many such situations where the answer regarding coverage is, It depends. At the end of the day, it’s important to know that accidental death and dismemberment policies are much, much more limited than comprehensive policies, and it’s a lot harder to actually get an approved claim.
If your loved ones will be impacted financially by your death or severe, an AD&D policy probably won’t be enough. However, you can look into buying term life coverage with an AD&D rider, which will provide you even more complete coverage.
If you have already decided that a term or whole life insurance policy is the best bet for your family, you will probably find that you have the option of adding an AD&D rider. This extra benefit allows you to boost your beneficiaries’ payout if you die (or provide benefits to you if you’re injured but not killed) in an AD&D-related incident.
For instance, a term life insurance policy of $100,000 will typically pay out to your loved ones whether you die in an accident or due to something like an illness or disease. However, if you have an optional AD&D rider, this will boost your benefit if your death is due to a covered accident. Whereas beneficiaries would have gotten $100,000 following your accidental death, the rider will allow them to receive even more.
An AD&D rider is also great for providing a type of living benefit, but without the requirement for a terminal illness. If you are injured – losing hearing, sight, limb, etc. – this rider will offer you benefits that can improve your quality of life and even provide for your new needs. If your income is impacted by your injury, this type of coverage can help account for the new deficit.
Is AD&D Right for Me?
Deciding whether to buy accidental death and dismemberment coverage can be tricky. It’s a much more affordable option than term life policies, and costs only a mere fraction of whole life premiums. However, your ability to file a claim and receive benefits will also be much more limited.
If your death (or even a severe injury) could have the potential to financially devastate your family, you should look into AD&D coverage as a rider only. You’ll still need to establish a term or whole life policy that will provide benefits to your loved ones, whether you pass away in a tragic accident or simply get ill. That way, you can ensure they are always protected, no matter what.
If have no dependents or debts, particularly if you are young, an AD&D policy might be sufficient. It would protect you in the case that you were dismembered in an accident, providing you with benefits that could help cover your new needs and diminished income. It could also cover your final expenses or provide an improved quality of life for your loved ones, were you to be unexpectedly killed in an accident.
While AD&D coverage is very limited and doesn’t pay out for many situations, it’s still a good type of policy to have as a rider or “just in case.”. It’s also very affordable, so it might be worth at least considering when establishing your life insurance coverage.
If you have questions about what type of life insurance you should buy, or want to know more about AD&D coverage, our licensed life insurance experts are available to answer your questions. Get a complimentary quotes and build a policy that you love.