Accidental Death

What Is Accidental Death and Dismemberment (AD&D) Insurance?

Accidental death and dismemberment (AD&D) insurance is insurance—usually added as a rider to a health insurance or life insurance policy—that covers the unintentional death or dismemberment of the insured. Dismemberment includes the loss—or the loss of use—of body parts or functions (e.g., limbs, speech, eyesight, and hearing).

Because of coverage limitations, prospective buyers should carefully read the terms of the policy. For instance, AD&D insurance is limited and generally covers unlikely events. Also, it is supplemental life insurance and not an acceptable substitute for term life insurance.

KEY TAKEAWAYS

• Accidental death and dismemberment (AD&D) insurance is usually added as a rider to a life insurance policy.

• AD&D insurance pays benefits in the case of a person’s accidental death or dismemberment, which is the loss—or loss of use—of body parts or functions.

• AD&D insurance usually comes with significant coverage limitations, so always read the fine print.

• AD&D does not pay if the insured died due to natural causes, such as cancer or heart disease.

• Known as double indemnity, AD&D may pay a benefit equal to or a multiple of (usually 2x) the regular insurance face amount.

• 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.

• 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 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.

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The Bottom Line

Accidental death and dismemberment (AD&D) insurance is an insurance policy that pays a death benefit upon the accidental death of an insured or upon the loss of a limb due to an accident. AD&D is purposed to serve as a supplement to regular life insurance as coverage is limited to certain types of accidents. No benefit is payable if the death is due to natural causes or other excludable events. However, AD&D can be a cost-effective way to supplement insurance and provide additional financial assistance to families of the deceased.

Call us to help you understand your options.