Accidental Death and Dismemberment (AD&D) Insurance

Accidents are the third leading cause of death in the U.S., after heart disease and cancer. In fact, they’re the No. 1 cause of death for adults ages 25 to 44, according to the Centers for Disease Control. So, it seems like it would make sense to have an insurance policy that would provide coverage for accidental deaths.

That’s why there is accidental death and dismemberment (AD&D) insurance.  But as with all insurance products, it pays to understand what it really covers and if you need it.

What is Accidental Death and Dismemberment Insurance?

As the name suggests, accidental death and dismemberment insurance provides coverage for death due to an accident. It generally also pays if you lose a limb or a function such as a sight, hearing, or speech in an accident.

Typically, the beneficiaries you name on your policy will receive a lump-sum payment if you die in an accident. You can receive what is called living benefits if you are injured, and the amount you receive often depends on the type of injury.

For example, an AD&D policy might pay 50% of the coverage amount you purchase if you lose one thing—for example, a hand, foot, or sight in one eye—and 100% if you lose two or more things. And policies might pay 50% to 100% of the benefit amount for paralysis as a result of an accident.

The amount of coverage you can get will depend on limits set by insurers or by employers that offer AD & D insurance as a workplace benefit. For example, you can purchase an AD & D policy from Farmers Insurance with a benefit ranging from $37,500 to $200,000.

Understanding Accidental Death and Dismemberment (AD&D) Insurance

AD&D insurance contains a schedule that details the terms and percentages of the various benefits and covered special circumstances. For example, if an insured dies from injuries sustained in an accident, the death must occur within a specified period for benefits to be paid.

Accidental Death

When adding an AD&D rider, also known as a “double indemnity” rider, to a life insurance policy, the designated beneficiaries receive benefits from both in the event the insured dies accidentally. Benefits typically cannot exceed a certain amount.

Most insurers cap the amount payable under these circumstances. As most AD&D insurance payments usually mirror the face value of the original life insurance policy, the beneficiary receives a benefit twice the amount of the life insurance policy’s face value upon the accidental death of the insured.

Typically, accidental death covers exceptional circumstances, such as exposure to the elements, traffic accidents, homicide, falls, drowning, and accidents involving heavy equipment.

AD&D insurance is supplemental life insurance and not an acceptable substitute for term life insurance.

Dismemberment

Most AD&D policies pay a percentage for the loss of a limb, partial or permanent paralysis, or the loss of use of specific body parts, such as the loss of sight, hearing, or speech. The types and extent of injuries covered are particular to and defined by each insurer and policy.

It is uncommon for a policy to pay 100% of the policy amount for anything less than a combination of the loss of a limb and the loss of a major bodily function, such as sight in at least one eye or hearing in at least one ear.

Voluntary AD&D

Voluntary accidental death and dismemberment (VAD&D) insurance is an optional financial protection plan that provides a beneficiary with cash if the policyholder is accidentally killed or loses certain body parts. VAD&D is also a limited form of life insurance and is generally less expensive than a full life insurance policy.

Premiums are based on the amount of insurance purchased, and VAD&D insurance is typically purchased by workers in occupations that place them at high risk of physical injury. Most policies are renewed periodically with revised terms.

How much such a policy pays depends not only on the amount of coverage purchased but also on the type of claim filed. For example, the policy might pay 100% if the policyholder is killed or becomes quadriplegic, but only 50% for the loss of a hand or the permanent loss of hearing in one ear or sight in one eye.

Special Considerations

Each insurance provider includes a list of exclusions. In most instances, the list includes suicide, death from illness or natural causes, and wartime injuries.

Other common exclusions include death resulting from the overdose of toxic substances, died while under the influence of nonprescription drugs, and the injury or death of a professional athlete during a sporting event. 

Usually, if the insured’s loss occurs because of a felonious act on his or her part, no benefit is payable.

What’s Covered by AD&D Insurance?

AD&D insurance will cover only deaths and injuries from accidents—not natural causes or illnesses. Not heart attacks or strokes. Policies typically cover death or injuries from accidents at work, home, and while traveling.

In addition, if your death is the result of an accident while traveling on public transportation, including a bus, train, or airplane, the payout can be double or triple the amount of your base coverage.

To be covered, a death from an accident doesn’t have to be instant, but it usually needs to occur within a certain time frame, such as within a few months. The policy will outline the rules.

Are There Additional AD&D Insurance Benefits?

Some insurers will pay an additional benefit if you were wearing a seatbelt during an accident that led to an injury or death. Additional benefits might also be provided to help children pay for higher education.

Counseling, legal and financial advising services for beneficiaries can be added benefits for a surviving spouse, too. These options will vary by insurer.

What’s Not Covered by AD&D Insurance?

What is considered an “accident” by insurance companies isn’t as straightforward as it might seem.

“The definition of accident could be subjective,” says Jon Voegele, chair of Life Happens, an industry-funded organization that provides consumer education.

Policies tend to have a long list of situations when death or injury wouldn’t be covered. Those exclusions can vary from company to company and can depend on the state where the policy is issued.

The following is a sample of exclusions in an accidental death insurance policy issued in Kansas by the online insurance agency Fabric. Most of these exclusions are common in AD&D policies.

Benefits are not payable for:

  • Injury incurred prior to coverage
  • Death is caused by illnesses, including mental illness.
  • Suicide or self-inflicted injuries
  • Drug overdose
  • Death or injury while driving under the influence of alcohol.
  • 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 or suffering during a war.
  • Injuries while serving in the armed services
  • Death or injury from car racing, flying a plane, playing professional sports, or participating in extreme sports such as sky-diving and scuba-diving.

How Can You Get AD&D Insurance?

If you work for a company, there’s a good chance your employer offers AD & D insurance as part of its benefits package.

According to the Society for Human Resource Management’s 2019 survey of employers, 83% said they provided this insurance as a benefit to employees in 2019.  AD&D insurance is one of the most commonly offered workplace benefits among those surveyed.

Some employer group plans also allow employees to insure their spouses and children.

A few insurance companies, such as AIG Direct, Farmers Insurance, and Mutual of Omaha, sell individual AD & D insurance policies. Online companies such as Fabric make getting an accidental death policy fast and easy.

You can apply for and get coverage instantly, says Allison Kade, editorial director of Fabric. (Note that Fabric’s policy covers only death, not dismemberment.) You also could work with an insurance agent that can compare policies to find the best life insurance option for your needs.

Accidental death coverage also can be sold as a rider, or add-on, to life insurance policies. The coverage can double what your life insurance payout would be if you die as a result of an accident.

How Much Does It Cost?

Rates for AD&D insurance tend to be lower than rates for traditional life insurance because the coverage is limited to accidents. And if your employer offers AD&D insurance, you might be able to get a basic amount as a free benefit.

In general, AD & D insurance premiums are tied to the amount of coverage you purchase. For example, monthly premiums might start at $4.50 for every $100,000 of accidental death coverage from Farmers.

Rates start at $6 a month for $100,000 of coverage from Fabric and rise to $30 a month for $500,000 of coverage. Because rates can vary from insurer to insurer, it can pay to shop around for the best rate.

Pros and Cons of AD&D Insurance

Some people mistakenly think that having AD&D insurance is a financial safety net if someone dies unexpectedly. “It gives them a false sense of security,” Voegele says. Because AD&D provides limited coverage, it isn’t right for everyone.

Pros

You don’t have to take a medical exam to get AD & D insurance. And you don’t have to answer questions about your health, which can make this type of policy appealing to people with pre-existing conditions that make it difficult to find affordable life insurance.

You won’t be denied coverage because of your health. You just have to meet the age requirements. Typically, you must be between the ages of 18 and 70 or 80.

You can get coverage quickly. Because there are no lengthy questionnaires to fill out, no medical exams to take, and no waiting period, you can get approved for a policy within a matter of days or even minutes for some policies purchased online.

Cons

Coverage is limited. AD&D will only pay a benefit if your loss is a result of an accident – and there are plenty of ways to die other than an accident. This limited coverage is a big drawback.

Coverage isn’t as cheap as it seems. An AD&D policy can cost less than life insurance. But that’s because the chance of an AD&D payout is relatively low. “The odds of you using it are so far down the scale that it becomes expensive for the payout,” Voegele says.

You might lose your coverage if you leave your job. Most people who have AD&D insurance get it through a group plan at work, Voegele says. Often, you can’t keep that coverage if you leave your job.

Who Should Get AD & D Insurance?

Because it only pays out in the event of an accident, AD&D insurance isn’t ideal for everyone. However, there are some instances when it might make sense.

  • If it’s a free workplace benefit. “If it’s offered for free, absolutely take it,” Voegele says. “If you have to pay for it, I would recommend that one size does not fit all.” In other words, consider the value you get for a workplace policy you’d have to pay for to determine if the coverage you’d get would be worth the cost.
  • If you can’t afford life insurance. “Accidents are the top cause of death for younger people,” Kade says. “So if this is all they can afford, it is better than nothing, certainly.”

Better Options

term life insurance policy provides better coverage than AD & D insurance because it provides a payout for any cause of death (except suicide, generally within the first two years of having the policy). So accidents, heart attacks, strokes, and more are all covered under a traditional term life policy.

If you’re young and healthy, you might be able to get a term life policy at a rate that’s not much higher than what you’d pay for AD&D insurance, Kade says.

You’d also be better off signing up for disability insurance through your employer or getting a policy on your own in case you’re unable to work. Disability insurance will help replace lost wages if you can’t work because of illness as well as an injury.

“I would shy away from accidental death plans because there are so many things that can happen to us that aren’t accidents,” Voegele says. “You need to be covered for anything.”

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