Everything You Need to Know About Accidental Death and Dismemberment Insurance

Last modified: July 3, 2021

Wondering what is accidental death and dismemberment insurance? Read along!

More than 38,000 Americans die in crashes every year, and another 4.4 million are injured seriously enough to require urgent medical care. If you have life insurance, you probably already know that while it covers death due to natural causes and accidents, certain circumstances could prevent a payout. That’s when accidental death and dismemberment insurance becomes useful. 

AD&D insurance covers incidents that cannot be foreseen, such as dismemberment or death caused due to an accident. 

In this article, we will talk about the benefits, exclusions, and cost of AD&D. Let’s get you all sorted! 

What Is Accidental Death and Dismemberment Insurance?

Accidental death and dismemberment insurance is generally added as a rider to an existing health insurance or life insurance policy. AD&D insurance meaning is simple: it’s a policy that covers dismemberment and death caused due to an accident. 

As with other types of insurance, the policy pays a death benefit to the beneficiaries named by the insured. Moreover, the death benefits get doubled when offered as an addition to the existing life insurance policy.

AD&D insurance costs less than most insurance policies, such as term and whole life insurance. 

What Is Accidental Death Benefit? 

It refers to a payment that a nominee receives when an insured individual dies in an accident.

What Is Employee AD&D? 

Some companies provide AD&D insurance as a part of an employee benefits package. 

What’s Covered by AD&D Insurance?

Let’s find out what is covered under accidental death and dismemberment insurance. 

Simply put, the insurance covers accidental death. It also pays for the loss of specific body functions, such as loss of sight, hearing, or speech. Furthermore, it covers loss of a limb or finger and even paralysis — partial or permanent. 

Apart from the accidental death benefit, some policies also pay living benefits if the policyholder gets seriously injured in an accident. The amount depends on the severity and type of injury suffered by the policyholder. 

What Does Accidental Death and Dismemberment Insurance Not Cover

AD&D insurance doesn’t pay out a death benefit to beneficiaries for:

  • Death due to natural causes and illnesses such as heart attack, stroke, cancer, and brain tumor
  • Death caused by drug overdose
  • Injury or death caused by mental illnesses
  • Suicidal death
  • Injuries suffered during serving in the armed forces
  • Death or injury caused by extreme sports, such as skydiving 
  • Injuries sustained during a war
  • Injury sustained while committing a crime
  • Death and injury sustained by drunk drivers 

How Does Accidental Death and Dismemberment Insurance Work?

If you haven’t purchased life insurance, your priority should be getting a policy that works for you. Then, you can add different riders to your existing life insurance policy to increase the coverage. In no way should you be looking at accidental death and dismemberment insurance as an alternative to life insurance. 

AD&D insurance works similarly to life insurance except for a few differences. 

A policyholder buys AD&D insurance as a standalone policy or a rider added to the existing life insurance policy. There is also a monthly premium paid by the insured, which can be as low as $5 to keep the policy alive. At the time of purchasing the insurance, the policyholder names the beneficiary on the policy. If the insured individual dies in an accident, the insurance pays a death benefit to the beneficiaries. 

When purchasing the insurance, the company will ask you to name primary and secondary beneficiaries. It doesn’t necessarily have to be one individual. If you choose two, you can either divide the proceeds between them or define the amount each nominee will receive. 

Face Amount 

Accidental death and dismemberment insurance comes with a face amount. The face amount depends on various reasons. 

If a policyholder dies due to accidental death, 100% of the face amount is paid to the beneficiaries. However, if the insured individual loses a limb, eye, or ear in the accident, the nominees receive a lower percentage of the face amount. Most of the time, the insurance pays a 25% face amount when a policyholder loses their thumb or index finger in an accident. In addition, insurance pays 100% when an accident causes quadriparesis and 25% for paraplegia. 

Double Indemnity

One of the significant benefits of accidental death and dismemberment insurance is the double death benefit received by the beneficiaries. Simply put, when adding an AD&D rider, also known as double indemnity, to life insurance, the beneficiaries receive the double death benefit when the policyholder dies or loses certain body parts or functions in an accident. 

What Is Voluntary AD&D Insurance?

Voluntary AD&D is an optional insurance plan. The policyholder pays a monthly premium in exchange for the cash provided to their beneficiaries upon the insured’s death. It can be either added as a rider to the existing voluntary life policy or purchased as a standalone policy.

Since this insurance is often offered as a part of the employment package, the monthly premium can be taken in the form of salary deductions. In most cases, employers can provide voluntary life AD&D insurance to an employee immediately upon hiring.

Voluntary AD&D insurance is different from workers’ compensation insurance. Workers’ comp only provides wage replacement and medical benefits to the employees who get injured at the workplace.

On the other hand, AD&D insurance covers accidents regardless of where they happen. Therefore, it’s best to purchase workers’ comp, life, voluntary AD&D, disability, and illness insurance for new workers to help round out a comprehensive package. 

How Is AD&D Different from Life Insurance?

Now, coming to the real deal: accidental death and dismemberment versus life insurance. 

Can You Collect Both AD&D and Life Insurance?

Yes, you can. By adding AD&D as a rider to your existing life insurance policy, the beneficiaries will benefit from both overages in the event the policyholder dies accidentally. 

How Is AD&D Insurance Different From Life Insurance?

Both life and AD&D insurance pay death benefits to the beneficiaries when the policyholder dies. However, they have certain limitations and differences. 

  • Insurance vs Rider

Life insurance is an insurance policy, while AD&D is an added life insurance policy benefit (rider). Simply put, think of AD&D insurance as a supplemental life insurance policy that doubles the death benefit paid to the nominees. 

  • Deaths caused by illness and natural causes

Life insurance offers a death benefit to the mentioned beneficiaries when the policyholder dies of natural causes. However, accidental death and dismemberment insurance doesn’t cover deaths caused by illness and natural causes. 

  • Monthly premium cost

Because AD&D is a rider that can be added to the life insurance policies or purchased separately, the monthly premium cost is significantly lower than that of life insurance. For example, the average cost of life insurance is $26 a month for a 40-year old with a 20-year term life policy, while the AD&D’s monthly premium starts from $4.5 for $100,000 of coverage. 

  • Death caused by accidental drug overdose

AD&D insurance doesn’t cover death caused by accidental drug overdose, but life insurance does. 

  • Death caused by drunk driving

One more difference between life insurance and accidental death and dismemberment insurance is that life insurance covers death caused by drunk driving. However, accidental death and dismemberment insurance doesn’t. 

  • Annual premium fee and health status

Being healthy decreases the annual premium of life insurance. But with AD&D insurance, the premium fee depends on the coverage amount. 

  • Dismemberment

AD&D insurance pays out a benefit to the nominees when the policyholder loses a limb, ear, or eye in an accident. 

  • Suicide

Life insurance covers suicide at least after two years of the policy, while AD&D insurance doesn’t cover suicide no matter when it occurs. 

  • Medical exam requirements

Sometimes a medical exam is required to qualify for life insurance. However, AD&D can be purchased regardless of your health situation. 

How Much Does AD&D Insurance Cost?

Accidental death and dismemberment insurance costs usually start at $4.5 per month for coverage worth $100,000. The amount paid depends on the coverage amount. 

Out of all the private companies offering AD&D, we found TruStage to be the most reliable. According to the TruStage accidental death and dismemberment insurance reviews, there’s no medical exam required to qualify for most policies, and there’s a 30-day money-back guarantee on most policies. 

AD&D insurance is a must-have for new workers who want accident coverage regardless of where it happens. If you are able to get more financial protection by paying $5 to $15 monthly, then it’s safe to say that buying accidental death and dismemberment insurance is totally worth it. 

Companies Offering AD&D Insurance

You can purchase AD&D insurance from any provider that offers life insurance policies. However, some of the companies sell the policies directly to the employers.

Let’s look at a few insurers offering AD&D:

    • Insubuy — available to individuals or groups.
    • SunLife — pays out 100% of the benefit for quadriplegia; 75% for paraplegia.
    • AIG Direct — offers policies for anyone from ages 18-80. Moreover, the policies are available for those in high-risk professions such as firefighters and police.
    • Fabric — coverage approval available within minutes of applying.
    • Aflac — provides accident insurance for personal use or for employees.
    • TruStage — available for credit union members.
    • Protective —provides AD&D riders with its life insurance policies.
  • Farmers Insurance — monthly premiums start at $4.5 per month for $100,000 coverage.

Pros and Cons

Is it necessary to get accidental death and dismemberment insurance, or is traditional life insurance enough? Here are the advantages and disadvantages of AD&D to help you decide:

Pros

  • As the coverage is limited to accidental deaths, the policy costs significantly less than traditional life insurance policies.  
  • If you give your employees AD&D coverage as an addition to the term life policy, the insurance will provide twice the death benefit to the named beneficiaries.
  • The policy can be added as a rider to your traditional insurance policy, a separate independent policy, and dependent coverage. 
  • You don’t need to have good health to apply for AD&D.

Cons 

  • AD&D doesn’t cover deaths caused by illnesses. It only covers death caused by accidents.
  • The rider also doesn’t cover death caused by suicide, surgery, or overdose. 

Other Common Riders to Add to Your Existing Life Insurance Policy

You can add other optional riders to your life insurance policy to boost your coverage. The most common ones include: 

Guaranteed Insurability Rider

It allows you to increase your policy’s death benefit or buy additional insurance without having to go through a second medical exam. You can purchase extra coverage only during the stated period of your policy. 

In addition, this specific rider is available for people with an existing term, whole, and universal life insurance. It’s best for those who see their financial obligations increasing in the future, such as childbirth or marriage. The monthly cost of adding guaranteed insurability insurance is as low as $3 to $5. 

Accelerated Death Benefit 

It pays a portion of your benefit prior to the policyholder’s death when diagnosed with a terminal disease that will shorten their lifespan. It can cover long-term care and other medical expenses. However, beware that purchasing an accelerated death benefit will reduce the final death benefit. 

Long-Term Care Rider

This rider covers the cost of care when a person needs help with two or more activities of daily living. The policyholder can pay for nursing home or at-home care by adding long-term care to their existing life insurance policy. 

Since you will be taking out money from your death benefit to pay for healthcare services, the amount of the death benefit will be reduced. Adding a long-term care rider can increase your annual life insurance premium by $600 to $800. 

Term Conversion Rider

By purchasing a term conversion rider, the policyholder can convert an existing term life insurance to permanent life insurance without a medical examination.

Family Income Benefit Rider

Family income benefit rider provides a steady flow of insured’s monthly income to the dependents when the policyholder passes away. 

Waiver Premium Rider

Waiver premium rider ensures that your life insurance policy stays active when you are not able to pay your annual premiums due to permanent disability. Some policies pay premiums until the policyholder is able to work again. The requirements and offerings vary from insurance to insurance.

Who Should Purchase Accidental Death and Dismemberment Insurance?

If you already have life insurance, you can purchase a few riders to enhance financial protection. If we specifically talk about AD&D, it’s most beneficial for people who are the only breadwinners of their families. 

Apart from them, employees already covered by workers’ compensation insurance should consider buying accidental death and dismemberment insurance. This way, they will not just be covered for work-related injuries. 

Regardless of what you do and who you are, an extra layer of protection should be considered. 

Is Accidental Death and Dismemberment Insurance Worth It?

It is; however, you should consider a few things before purchasing the policy.

People who believe that accidental death and dismemberment insurance is a suitable replacement for life insurance are totally wrong. Heart disease is considered the #1 cause of death in the US. Each year, around 655,000 Americans die due to heart disease. Therefore, it’s best to purchase both to help minimize most risks. 

FAQs

Does AD&D Cover Heart Attack?

A&D insurance only covers death from accidents. So, natural causes and illnesses like heart attack, brain tumor, and cancer aren’t covered by the insurance. However, you don’t have to worry about it because your standard life insurance policy covers death caused by natural causes. 

Does AD&D Cover Cancer?

AD&D insurance doesn’t cover death due to illness. However, if you have a life insurance policy, natural diseases like stroke, tumor, cancer, and heart attacks will be covered.

Are There Additional AD&D Insurance Benefits?

AD&D insurance serves as a supplement to your regular life insurance. Apart from providing a death benefit to the beneficiaries, it also pays for injuries that result in loss of limb, paralysis, and loss of senses. One additional benefit of purchasing AD&D insurance is that it can be added, canceled, and changed anytime without incurring any penalties. 

How Is AD&D Different From Life Insurance?

Traditional life insurance doesn’t cover such injuries as loss of limb and paralysis. Regular policies pay a tax-free death benefit to the beneficiaries when the policyholder dies. However, AD&D pays out death benefits when the insured individual dies or gets injured in an accident.

As AD&D only covers death caused by accidents, the premium cost is much lower than that of life insurance. 

Finally, you don’t need a medical examination to qualify for AD&D, but you need one for life insurance. 

How Is AD&D Compensation Calculated?

The compensation paid to the beneficiaries depends on the coverage limit. Moreover, the death benefit is usually equal to or some multiple of the standard life insurance policy’s death benefit amount.