DO I REALLY NEED ACCIDENTAL DEATH & DISMEMBERMENT INSURANCE?
Is accidental death and dismemberment insurance worth it? AD&D insurance is an often forgotten type of life insurance. Yet it provides certain highly-beneficial living insurance benefits not found in other life insurance plans.
Even the best-laid plans can be undone by an unexpected accident. Accidents often strike without warning and can result in death or serious injury.
In fact, in 2014 alone, accidents were the fourth highest cause of death in the United States according to the CDC.
You’ve probably heard of accidental death and dismemberment insurance, also called AD&D insurance. You might even have an AD&D insurance policy through your employer or bank (especially considering how ubiquitous they’ve been over the years).
But do you know what benefits accidental death and dismemberment insurance provides? And more importantly, do you really need AD&D insurance?
We know an accidental death can be tragic and can threaten your family’s financial well-being. Let’s talk about when AD&D insurance can help your family overcome an unexpected death or severe injury.
WHAT IS AD&D INSURANCE?
Where different types of insurance can be confusing, accident insurance is fairly straightforward. It’s a simple policy with very specific coverage.
As you might guess from the name, accidental death and dismemberment insurance covers death resulting from an unexpected accident.
In this regard, AD&D insurance is a type of life insurance. If you were to die from an accident, such as a car crash or murder, accident insurance would pay out its death benefit to your beneficiary.
But what about that second “D” in AD&D insurance: dismemberment?
Unlike life insurance, accident insurance will pay out a portion of its face value if you’re grievously wounded (a.k.a - dismembered). Losing an eye or limb, for example, would trigger a scheduled payout (more on that later).
AD&D insurance is generally more affordable than a term life policy. You can often buy this type of insurance without needing to medically qualify. You can purchase a policy in three ways:
- Stand-alone policy
- Supplement to a larger life insurance policy
- Rider on an existing life insurance policy
What does accidental death and dismemberment insurance cover?
Accidental death and dismemberment insurance covers exactly what’s in the name: accidental death and dismemberment.
Unlike life insurance, accident insurance does not pay out for the following things:
- "Bodily malfunctions” (ie. heart attacks or strokes)
- Death from any extreme sports (ie. skydiving or bungee jumping)
The potential for having an accident can be concerning because of how suddenly one can happen.
While a long-term illness could leave you with enough time to sort out your affairs, accidents can result in a quick and tragic death you may not have been able to fully prepare for.
In fact, 35,000 people died in car accidents in 2015, according to the Insurance Institute for Highway Safety. That means thousands of families lost loved ones unexpectedly and without warning.
Accidental death can leave families reeling from grief and wondering how they’ll make ends meet. In fact, 75 to 80 percent of expenses will remain after the death of a spouse.
AD&D insurance pays out your policy’s full death benefit upon an accidental death. Some examples of accidental deaths covered by this type of policy include:
- Car crashes
- Heavy machinery
- Exposure to the elements
In order for AD&D insurance to cover an accidental death, you must die from injuries sustained in the accident and not from anything related.
For example, if a heart attack leads to a car accident, your policy likely wouldn’t pay out because it wasn’t the actual accident that caused your death. Instead, it was the heart attack that caused the accident to occur.
Insurers usually require that your death is ruled an accident within a specified time limit — usually 90 days. They might also require an autopsy to verify your death was the result of an accident and not an illness or sickness.
Of course, accident insurance won’t cover any deaths that result from illegal activities, war or suicide. (Though they may cover suicide after a set amount of time.)
The dismemberment part of AD&D insurance covers:
- The loss of one or more body parts or limbs
- The loss of hearing or vision
- Some types of paralysis
Dismemberment coverage is a unique benefit of AD&D insurance. It's particularly useful for those with a heightened risk of losing a limb or eye.
Even if you’re not in a trade or job where you’re at risk for losing a limb, accidents happen. It’s easy for a slip-up to occur while doing some yard work, quite possibly leading to a nasty and painful injury.
The loss of a limb, your vision or hearing can have a substantial impact on your finances. Not only will you have hospital bills, but you’ll likely be out of work while recovering and losing wages while bills continue to add up.
AD&D insurance pays out a portion of the face value of your policy’s benefits based on the extent of dismemberment you’ve sustained. Your benefits are scheduled based on the percentage of body parts and functions you’ve lost.
For example, losing an arm may pay out 50 percent of your policy’s benefits, whereas losing total eyesight could pay out the full face value. Losing both arms, or an arm and a leg may also trigger the payout of 100 percent of your benefits.
Dismemberment coverage lessens the financial impact an unexpected accident can have on your family.
While you’re out of work from your injury, you’ll have a little bit of buffer cash to tide your family over while you re-evaluate your return to work or the need for improvements to your home to make it more accessible after your dismemberment or impairment.
If you lose a leg and become wheelchair-bound, your home will need an accessibility ramp installed. Your family may need a special van to help transport you to and from doctors, to the store or to simply continue living your life.
Accident insurance benefits can all contribute to paying for these quality-of-life improvements after a debilitating injury.
HOW DOES AD&D DIFFER FROM OTHER INSURANCE POLICIES?
You may be thinking that AD&D insurance sounds quite similar to life or disability insurance. While it has similarities to both, the unique requirement of accident insurance is that your death or impairment must stem entirely from an accident.
In contrast, life insurance pays out upon your death, no matter what the cause. Disability insurance only requires you to be considered partially or totally disabled and unable to work as a result.
So if you were to pass away from cancer or lose a limb due to diabetes, accident insurance wouldn’t help you out.
But AD&D insurance can work alongside life insurance as a supplement.
You see, if you were to die from an accident and had both a life insurance policy and either an AD&D rider or policy, both policies would pay out to your beneficiary.
When your life insurance policy has an AD&D rider, your death benefit is usually doubled if you happen to die from an accident. This is sometimes called “double indemnity.”
What is the difference between life and AD&D insurance?
Life insurance pays out when you die from nearly any cause (except for those few that are excluded, such as illegal activities or war). This means if you’re unfortunately diagnosed with and pass away from cancer, your life insurance death benefit will pay out.
If you have only AD&D insurance and die from cancer, your beneficiary will receive nothing because death from cancer is not considered an accident.
But life insurance doesn’t cover dismemberment or the loss of limbs, hearing or eyesight. While some types of life insurance might allow you to take a loan against your policy for some added funds, there’s no special coverage for dismemberment.
In this way, AD&D insurance covers more than just your death. Accidental death and dismemberment insurance benefits may be paid out while you’re still alive, providing some form of living insurance that life insurance doesn’t cover.
AD&D insurance bridges the gap left behind by life insurance by providing a benefit if you suffer from dismemberment. In this way, AD&D supplements your life insurance policy.
My employer offers AD&D coverage as a rider on our group term life plan for an additional charge. Should I purchase it?
The cost of accidental death and dismemberment insurance through your employer is often negligible. More importantly, since it’s offered as a rider on your term life insurance, it would provide double indemnity coverage. That means your death benefit is increased if you were to die from an accident.
While you’re more likely to die from an illness or natural cause, AD&D insurance is particularly useful if your job is physically dangerous. Even if you don’t die from an accident, it’s reassuring to have coverage for dismemberment and impairment.
Overall, it’s usually a good idea to purchase AD&D insurance through your employer. This is especially true if your job is more physically intensive or you’re young enough to where dismemberment can have a long-term impact on your life.
As with most benefits offered through your job, however, quitting or being fired may result in you losing your AD&D coverage.
If you’re not planning on being employed at the same place of work for long, you may be better served with an individual policy you own yourself.
I don’t have any other type of life insurance. Should I purchase AD&D insurance?
While you can certainly buy only AD&D insurance, this type of policy works best when used as a supplement to life insurance.
If your finances dictate that you can only afford one or the other, AD&D insurance is usually more bang for your buck. That is as long as the chance of you dying from an accident or being physically injured is high enough to forsake the more inclusive coverage of life insurance.
According to OSHA, 57 percent of workplace amputations happened in the manufacturing industry. So if you work in an industry where it’s a very real possibility you’ll lose a limb, purchasing AD&D insurance is a wise decision.
Likewise, if you enjoy going for road trips or working in the yard with power tools or heavy equipment, AD&D insurance would be a valuable tool to protect your family and finances from any potential accidents.
When it comes to accident and dismemberment insurance vs. life insurance, the best option for you is to have both types of policies. If you have to choose between one or the other, consider the likelihood of yourself dying from an accident or becoming dismembered.
Are you young and healthy? Do you think there’s a higher risk of you losing your life from an accident than an illness? You may be well-served by an accidental death and dismemberment insurance policy.
HOW MUCH DOES AD&D INSURANCE COST?
Choosing between AD&D insurance vs. life insurance might seem like a difficult decision, especially if you deem both a necessity.
While everyone should have some form of life insurance (even if it’s only a small amount to cover funeral expenses), more insurance is never a bad thing. It’s tax-free money to your loved ones, after all.
As long as it’s affordable, of course.
So what’s AD&D insurance cost? Is it possible to pay premiums for both life insurance and AD&D insurance and still have money left over to, you know...enjoy life?
Absolutely! In fact, you’ll probably be surprised by how cost-effective AD&D insurance truly is.
The premiums of AD&D insurance are often lower than those of comparable life insurance policies. That's because every life insurance policy in good standing will pay out benefits at some point. Whereas, not everyone who owns AD&D insurance will make a claim against their policy.
This is a good thing, of course. Who wants to die from an accident or lose a limb?
The fewer payouts to AD&D policyholders means the premiums for AD&D policies are less expensive.
Our online quote tool shows a 27-year-old non-smoking male in Florida could purchase AD&D insurance with a $50,000 benefit for $5.23 per month. That’s $62.76 a year.
SO IS ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE WORTH IT?
If you’re worried about an accident or major injury causing undue financial stress on your family and loved ones, AD&D insurance is probably worth purchasing.
Accident insurance supplements your life insurance coverage. It provides a cash benefit if your life is negatively impacted by dismemberment. When you consider the low cost of coverage, it’s worth having that peace-of-mind that you or your loved ones will have some financial buffer if an accident happens.