Accidental Death and Dismemberment (AD&D) Insurance: What It Covers

What Is Accidental Death and Dismemberment Insurance?

Accidental death and dismemberment insurance, commonly known as AD&D, is a type of insurance that pays a benefit if you die in an accident or suffer a serious injury. It is not the same as regular life insurance. AD&D only covers accidents. It does not pay for death caused by illness, disease, or natural causes.

AD&D policies have two main components. The accidental death portion pays a lump-sum benefit to your beneficiaries if you die in a covered accident. The dismemberment portion pays you a benefit while you are alive if you suffer a qualifying injury, such as losing a limb or your eyesight.

Many people get AD&D coverage through their employer as a workplace benefit. It is also available as an individual policy you can buy on your own. AD&D is one of the most affordable types of insurance, often costing just a few dollars per month.

How AD&D Insurance Differs from Life Insurance

The biggest difference between AD&D and life insurance is what triggers a payout. Life insurance pays a death benefit no matter how you die. It covers death from illness, disease, accidents, and natural causes. AD&D only pays if you die from an accident or suffer a covered injury.

This is an important distinction. According to the Centers for Disease Control and Prevention, accidents are not the leading cause of death for most age groups. Heart disease, cancer, and other illnesses cause far more deaths than accidents. This means AD&D insurance is less likely to pay out than traditional life insurance.

Here is a side-by-side comparison of AD&D and traditional life insurance.

• Coverage trigger: Life insurance covers death from any cause. AD&D only covers accidental death and qualifying injuries.
• Living benefits: Life insurance generally does not pay while you are alive unless it has special riders. AD&D pays a partial benefit for dismemberment injuries while you are still living.
• Cost: AD&D is much cheaper than life insurance because it covers fewer events. A $250,000 AD&D policy may cost $10 to $20 per month. A $250,000 term life policy costs significantly more.
• Medical exam: Most AD&D policies do not require a medical exam. Many life insurance policies do require one, though no-exam options exist.
• Exclusions: AD&D has many exclusions that limit when it pays. Life insurance has fewer exclusions, usually limited to suicide within the first two years and material misrepresentation on the application.

Because of these differences, financial experts generally recommend using AD&D as a supplement to life insurance, not as a replacement. AD&D can add an extra layer of protection at a low cost, but it should not be your only coverage.

What Events Does AD&D Insurance Cover?

AD&D insurance covers a specific list of events. These are all related to accidents that cause death or serious bodily harm. The exact covered events vary by policy, but most AD&D policies cover the following.

• Accidental death. If you die as a direct result of an accident, the policy pays the full death benefit to your beneficiaries. The death usually must occur within a set time after the accident, often 90 days to one year.
• Loss of limbs. Losing a hand, foot, arm, or leg in an accident typically qualifies for a dismemberment benefit. The benefit amount depends on how many limbs are lost.
• Loss of sight. Losing vision in one or both eyes due to an accident is a covered event. The benefit is based on whether one or both eyes are affected.
• Loss of hearing. Some policies cover accidental loss of hearing in one or both ears.
• Loss of speech. Permanent loss of the ability to speak due to an accident may be covered.
• Paralysis. Paraplegia or quadriplegia caused by an accident is often covered. Paraplegia means paralysis of both legs. Quadriplegia means paralysis of all four limbs.

Common types of accidents that may be covered include car crashes, falls, drowning, fires, and other unintentional events. The key requirement is that the death or injury must result directly from an accident, not from illness or disease.

The AD&D Benefit Schedule: Full vs. Partial Benefits

Every AD&D policy includes a benefit schedule. This is a table that shows how much the policy pays for different types of losses. The benefit schedule divides payouts into full benefits and partial benefits.

A full benefit, also called the principal sum, is the maximum amount the policy pays. This is typically paid for accidental death or the most severe injuries. For example, if your AD&D policy has a $200,000 principal sum, accidental death pays the full $200,000.

Partial benefits are paid as a percentage of the principal sum. Here is a typical benefit schedule, though exact percentages vary by policy.

• Accidental death: 100 percent of principal sum.
• Loss of both hands, both feet, or sight in both eyes: 100 percent of principal sum.
• Loss of one hand and one foot: 100 percent of principal sum.
• Quadriplegia: 100 percent of principal sum.
• Paraplegia: 75 percent of principal sum.
• Loss of one hand or one foot: 50 percent of principal sum.
• Loss of sight in one eye: 50 percent of principal sum.
• Loss of thumb and index finger on same hand: 25 percent of principal sum.

Read your policy's benefit schedule carefully so you understand exactly what each type of loss pays. The percentages can vary significantly between insurance companies.

Common Exclusions in AD&D Policies

AD&D policies have more exclusions than traditional life insurance. These exclusions are situations where the policy will not pay a benefit, even if the death or injury was technically caused by an accident. Understanding these exclusions is critical before you rely on AD&D coverage.

Here are the most common AD&D exclusions.

• Illness or disease. Death or injury caused by sickness, infection, or any medical condition is not covered. This includes heart attacks, strokes, and cancer.
• Drug or alcohol use. If the accident happened while you were under the influence of drugs or alcohol, the claim may be denied. This includes prescription drugs not taken as directed.
• Self-inflicted injuries. Any injury you cause to yourself intentionally is excluded. Suicide is also excluded.
• High-risk activities. Many policies exclude injuries from activities like skydiving, bungee jumping, hang gliding, rock climbing, or racing vehicles. Check your policy for the specific list.
• War or military action. Death or injury during war, armed conflict, or while serving in the military may be excluded.
• Committing a crime. If you die or are injured while committing a felony, the policy will not pay.
• Medical complications from surgery. If you die during or after elective surgery due to complications, AD&D usually does not cover it unless the surgery was needed because of a covered accident.

Always read the exclusions section of your AD&D policy carefully. If you are unsure whether a specific activity or situation is covered, ask your insurer before you need to file a claim.

AD&D as a Workplace Benefit

Many employers offer AD&D insurance as part of their employee benefits package. In some cases, the employer pays for a basic level of AD&D coverage at no cost to you. This is called employer-paid or basic AD&D.

Employer-paid AD&D is typically a small amount, often equal to one or two times your annual salary. For example, if you earn $60,000 per year, your employer might provide $60,000 or $120,000 in AD&D coverage at no cost.

Group AD&D through work is convenient because enrollment is easy. You usually sign up during your employer's open enrollment period. No medical exam or health questions are required for the basic coverage amount.

However, there are downsides to relying only on employer-provided AD&D. The coverage usually ends when you leave the job. The coverage amount may not be enough for your needs. And the policy terms are chosen by your employer, so you have limited control over exclusions and features.

Voluntary AD&D Insurance

In addition to basic employer-paid AD&D, many companies offer voluntary AD&D. This is extra coverage you can choose to buy through your employer's benefits plan. You pay the premiums through payroll deduction.

Voluntary AD&D lets you increase your coverage beyond the basic amount. You might be able to buy up to five or ten times your annual salary in additional AD&D coverage. Some plans also let you add coverage for your spouse and dependent children.

The cost of voluntary AD&D is usually very low because the premiums benefit from the group rate your employer negotiated with the insurer. Even with voluntary add-ons, you may pay only a few dollars per pay period for a significant amount of additional coverage.

Keep in mind that voluntary AD&D through your employer is still group coverage. It usually ends when you leave the job, although some policies offer a portability option that lets you keep coverage after you leave.

How Much Does AD&D Insurance Cost?

AD&D insurance is one of the most affordable types of insurance you can buy. The low cost is because AD&D only pays for accidents, which limits the number of claims. Most deaths are caused by illness, not accidents, so the insurer's risk is lower.

Individual AD&D policies typically cost between $5 and $25 per month for $100,000 to $500,000 in coverage. Your exact cost depends on your age, the amount of coverage, and the insurance company. Unlike life insurance, AD&D premiums are usually the same regardless of your health.

Group AD&D through an employer is even cheaper. Many employers pay the full cost of basic coverage. Voluntary add-on coverage through your employer often costs just a few dollars per paycheck because of the group discount.

While the low cost is appealing, remember that you get what you pay for. AD&D covers far fewer situations than life insurance. Do not let the low price trick you into thinking AD&D is a complete substitute for life insurance.

Who Should Consider AD&D Insurance?

AD&D insurance can be a smart addition to your coverage in certain situations. Here are the people who benefit most from AD&D.

• People who want to supplement their life insurance. If you already have life insurance but want extra protection against accidents, AD&D can provide a second payout on top of your life insurance death benefit.
• Workers in physically demanding or dangerous jobs. If your job involves heavy machinery, construction, driving, or other physical risks, AD&D provides extra coverage for the higher accident risk you face.
• People with long commutes. The more time you spend driving, the higher your risk of a car accident. AD&D can provide financial protection for this risk.
• People who cannot qualify for traditional life insurance. If health issues prevent you from getting life insurance, AD&D can provide some death benefit coverage since it does not require a medical exam.
• People on a tight budget. If you cannot afford enough life insurance right now, AD&D can add a layer of protection for very little money while you work toward getting proper life insurance.

Who Does Not Need AD&D Insurance?

AD&D is not necessary for everyone. Here are some situations where AD&D may not be worth it.

• You already have enough life insurance. If your life insurance coverage is sufficient to meet all your family's financial needs, adding AD&D may be unnecessary.
• You have no dependents. If no one relies on your income, you may not need any death benefit coverage, including AD&D.
• You are retired with sufficient savings. If you have enough assets to cover your family's needs, AD&D may not add meaningful value.

The most important thing is to get adequate life insurance first. Life insurance covers all causes of death and is the foundation of your protection plan. Once you have enough life insurance, you can decide whether to add AD&D for extra accident protection.

How to File an AD&D Insurance Claim

Filing an AD&D claim follows a specific process. Understanding the steps in advance can help your beneficiaries or you file a claim quickly and correctly.

• Notify the insurance company. Contact the insurer as soon as possible after the accident. For workplace policies, notify your employer's human resources department as well.
• Submit the claim form. The insurer will provide a claim form. Fill it out completely and accurately. Include all requested details about the accident.
• Provide supporting documents. The insurer will request documentation such as a death certificate, police report, autopsy report, medical records, or hospital records. For dismemberment claims, medical evidence of the injury is required.
• Wait for the investigation. The insurer will review the claim to confirm the death or injury was accidental and does not fall under any exclusion. This process can take several weeks.
• Receive the benefit. If the claim is approved, the insurer pays the benefit. For accidental death, the payment goes to the named beneficiary. For dismemberment, the payment goes to the policyholder.

AD&D claims can sometimes be disputed. The insurer may argue the death was caused by illness rather than accident, or that an exclusion applies. If your claim is denied, you have the right to appeal. Consider consulting an attorney who specializes in insurance claims if you believe a denial is unfair.

Tips for Choosing an AD&D Policy

If you decide AD&D insurance is right for you, here are some tips to help you choose the right policy.

• Read the exclusions carefully. This is the most important part of any AD&D policy. Make sure you understand every exclusion before you sign up.
• Review the benefit schedule. Know how much the policy pays for different types of losses. Make sure the payouts match your expectations.
• Check if the policy is portable. If you get AD&D through work, find out whether you can keep it if you leave your job.
• Compare individual and group options. Group rates through your employer may be lower, but individual policies offer more flexibility and portability.
• Do not substitute AD&D for life insurance. Make sure you have adequate life insurance before adding AD&D coverage.

Key Takeaways

Accidental death and dismemberment insurance provides affordable coverage for accidents. It pays a death benefit if you die in an accident and a partial benefit if you suffer a serious injury like loss of a limb or eyesight. However, it does not cover death from illness, disease, or natural causes.

AD&D works best as a supplement to life insurance, not a replacement. The low cost makes it easy to add to your coverage, but the many exclusions mean it will not pay in most situations. Always make sure you have adequate life insurance as your foundation before considering AD&D as an add-on.

If your employer offers free AD&D coverage, take advantage of it. Free coverage is always worth having. For voluntary or individual AD&D, weigh the low cost against the limited coverage and decide whether it makes sense for your situation.