Accidental Death and Dismemberment (AD&D) Insurance

Accidental death and dismemberment insurance, or AD&D for short, is a limited form of insurance that pays out if you die or get seriously injured in an accident.

The beneficiary(ies) you name on your policy will receive a lump-sum payout if you die from an accident.

You may receive living benefits if you are injured in an accident, but the amount you get usually depends on the type and severity of the injury.

Accidental death insurance is inexpensive because it is considered low risk to insurers. In other words, it rarely pays out.

AD&D insurance supplements other insurance — such as regular life insurance or disability insurance — in the event you are accidentally killed, dismembered or seriously injured. It is important to understand exactly what an AD&D policy covers — and does not cover — when considering all your insurance options.

Accidental death and dismemberment insurance will pay 100% of the policy value if you are killed in an accident.

Cases of accidental death can include exposure to the elements, traffic accidents, homicide, falls, drowning, plane crashes or accidents involving heavy equipment.

Dismemberment is the loss of a body part or bodily function due to an accident. The types of injuries covered can vary by policy and insurance company.

AD&D insurance often comes with many restrictions. It does not cover death due to natural causes or illnesses.

AD&D insurance doesn’t cover all cases of death or dismemberment. It only pays out in specific situations and under specific conditions.

For example, if you suffer a heart attack while swimming that causes you to drown, the policy may not pay out.

AD&D policies often have a long list of circumstances under which a death or injury isn’t covered.

The death benefit is paid only if you die within a certain period of time after the accident. This can range from a few months to a year.

AD&D insurance payouts vary depending on the insurance company issuing the policy. Typically, an AD&D policy will pay 100% of its value if you die due to a covered accident.

But the payout for dismemberment typically depends on the extent of the injuries and the terms of the insurance contract. For instance, if you lose a hand, foot or one of your eyes, the policy may only pay out 50% of the value of the policy.

So it’s uncommon for a policy to pay 100% for an injury or dismemberment. One exception may be losing both a limb and a major bodily function or feature, such as a finger and vision in one of your eyes.

Exactly how much an AD&D policy will pay out for a particular loss is detailed in the policy’s schedule. The schedule lists the losses it covers and how much it will pay for each loss up to the value of the policy.

You should review the schedule of any AD&D insurance policy you are considering purchasing to understand exactly what is covered.

Many employers offer AD&D insurance as part of a benefits package. Your employer’s policy may even allow you to include coverage for your spouse and children.

If your job offers AD&D insurance, you might be able to get a basic policy for free as part of your benefits package.

Some life insurance companies also sell individual AD&D policies. You can work with an insurance agent to compare policies.

Accidental death and dismemberment coverage may also be sold as a rider, or add-on, to a life insurance policy. Adding this rider could double what your life insurance pays out if you die from an accident.

There are several insurance companies that sell AD&D insurance. Some specialize in selling group plans to employers, while others make coverage available to individuals.

It may be worth comparing an employer-based AD&D policy with one you purchase on your own to see which is a better bargain.

There are a few things you should know about each — particularly the advantages and disadvantages of each option.

There are several differences between accidental death and dismemberment insurance and life insurance. AD&D insurance should be viewed as a supplement to your regular life insurance coverage.

The biggest differences are the purpose of each type of insurance and the circumstances under which each will pay out.

Life insurance typically covers more causes of death than AD&D. In addition, you can add AD&D coverage to your insurance portfolio — either as an AD&D rider to your life insurance policy or as a stand-alone AD&D policy.

AD&D insurance can offer coverage for your loved ones if you die or suffer a serious injury related to an accident.

But because AD&D provides limited coverage, it isn’t right for everyone.

While accidental death and dismemberment insurance may seem like a good idea, it shouldn’t replace standard life insurance coverage.

AD&D should be considered a supplement to regular life insurance coverage and to disability insurance because it only pays out in limited situations with specific conditions.

Most experts recommend getting AD&D insurance if it’s offered for free through your employer. It’s typically free — or very inexpensive — making it a worthwhile investment in your family’s financial security.

But if you must pay for it, other options will afford you better protection and coverage.

For example, term life insurance won’t cost much more than AD&D insurance for people who are young and healthy.

Another option is disability insurance. You may be able to obtain disability insurance that provides all the coverage an AD&D policy does at a lower rate through your employer.