AD&D insurance pays out if you die or are seriously injured in an accident.
Written by Barry Eitel
Barry Eitel
Barry Eitel is a content writer and journalist focused on insurance, small business and finance. He has researched and written about personal finance since 2012, with a special focus on entrepreneurship, freelancing and other small business operations. His writing on insurance and small business has been featured in 7x7, Brit + Co, Intuit Quickbooks, Bankrate, Policygenius and Lendio.
Reviewed by Nupur Gambhir
Nupur Gambhir
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.
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Even though we cannot eliminate risk from our lives, you can take steps to protect yourself and your loved ones financially. Like life insurance, accidental death and dismemberment (AD&D) insurance is one safeguard against the unexpected.
AD&D is usually added as a supplement to standard life insurance and does not replace life insurance. Still, AD&D policies are inexpensive, easy to understand, and can provide robust coverage when used alongside a life insurance plan. If you die accidentally, your beneficiary receives funds so their life isn’t disrupted financially. If you are incapacitated by an accident, like if you lose an arm, you can receive a payout from your policy.
AD&D policies cover accidents. Most AD&D claims are for accidental death. Also, there are standard payouts when it comes to loss of limbs or other bodily functions, like sight.
Essentially, if a covered accident occurs, you or your beneficiary will file a claim and receive a payout according to your policy.
Policies will outline on whether they cover a specific body party. A big toe, for instance, might not go into a payment category because certain dismemberment policies often start at or above the ankle.
Your policy may state that in order for you to receive benefits, your death or the loss of bodily function must occur within a certain time frame after the accident, usually within three months. Your death or dismemberment must be a direct result of the injuries you sustained in the accident. If you die and meet the criteria, the policy will pay the principal (i.e., the full) amount. Loss of limbs or eyesight are paid on a scheduled basis, meaning a portion of the principal amount.
A rider for accidental death insurance on your standard life insurance policy is often called a double indemnity rider. If you die due to an accident, your beneficiaries are paid out from both policies. The double moniker refers to the fact that payouts from accidental death insurance riders are commonly equal to payouts from your standard life insurance, so your beneficiaries receive twice the amount of money if your death is accidental.
Understanding what counts as sudden, accidental types of demise is important here. Death from fallings, exposure to elements, homicide, drowning, and traffic crashes, for example, are all accidental. Your beneficiaries will not receive an AD&D if you die from a disease, even if the disease is sudden. This is why you need to have standard life insurance, which will pay out for more causes of death than an AD&D policy.
Still, household accidents are a major cause of death in the United States, as are fatalities caused by automobile crashes. AD&D helps your beneficiaries stay afloat financially if you are struck by an unexpected tragedy.
AD&D insurance also covers dismemberment along with accidental death. AD&D places different payout values on various dismemberment values. Your beneficiaries receive the full payout if you die accidentally, but if you are dismembered (or otherwise lose an essential bodily function like your sight) you receive a fraction of your principal according to your policy’s plan. If you lose multiple limbs or bodily functions, you might receive the full amount of your principal as a payout.
If a major accident occurs, the circumstances of the incident become extremely important to your coverage. Each insurer and policy will be different, so you will want to read all the fine print of your policy to know what sort of accidents are out of bounds. Don’t be afraid to shop around if you think more types of accidents should be covered, or if you are unhappy with the payout amounts.
However, there are some common exclusions to most AD&D policies:
When debating the pros and cons of AD&D insurance, the most important thing to remember is that you should never see it as a replacement for traditional life insurance. While accidents happen, standard life insurance protects you and your loved ones in a much more robust way.
