Understanding AD&D Insurance: Benefits & Coverage (2024)

As the name suggests, accidental death and dismemberment insurance provides coverage for a death due to an accident. It generally also pays if you lose a limb or a function such as sight, hearing or speech in an accident.

Typically, the beneficiaries you name on your policy will receive a lump-sum payment if you die in an accident. You can receive what are called living benefits if you are injured, and the amount you receive often depends on the type of injury.

For example, an AD&D policy might pay 50% of the coverage amount you purchase if you lose one thing—for example, a hand, foot or sight in one eye—and 100% if you lose two or more things. And policies might pay 50% to 100% of the benefit amount for paralysis as a result of an accident.

The amount of coverage you can get will depend on limits set by insurers or by employers that offer AD&D insurance as a workplace benefit. For example, you can purchase an AD&D policy from Farmers Insurance with a benefit ranging from $37,500 to $200,000 for an accident covered by your policy. Farmers may also pay $1 million for “certain circ*mstances,” such as losing your life in a plane crash on a commercial flight.

AD&D insurance will cover only deaths and injuries from accidents—not natural causes or illnesses. Not heart attacks or strokes. Policies typically cover death or injuries from accidents at work, home and while traveling.

In addition, if your death is the result of an accident while traveling on public transportation, including a bus, train or airplane, the payout can be double or triple the amount of your base coverage. To be covered, a death from an accident doesn’t have to be instant, but it usually needs to occur within a certain time frame, such as within a few months. The policy will outline the rules.

What is considered an “accident” by insurance companies isn’t as straightforward as it might seem.

“The definition of accident could be subjective,” says Jon Voegele, agency vice president of Country Financial.

Policies tend to have a long list of situations when death or injury won’t be covered. Those exclusions can vary from company to company and can depend on the state where the policy is issued. Benefits are generally not payable for:

• Injury that happened prior to coverage
• Death caused by illnesses, including mental illness
• Suicide or self-inflicted injuries
• Drug overdose
• Death or injury while driving under the influence of alcohol
• Death or injury from voluntarily inhaling gas or taking poison
• Death or injury while committing a crime
• Death or injury while participating in a riot or suffered during a war
• Injuries while serving in the armed services
• Death or injury from car racing, flying a plane, playing professional sports or participating in extreme sports such as sky diving and scuba diving

If you work for a company, there’s a good chance your employer offers AD&D insurance as part of its benefits package. Some employer group plans also allow employees to insure their spouse and children.

A few insurance companies, such as AIG Direct, Farmers Insurance and Mutual of Omaha, sell individual AD&D insurance policies. You can also look for quotes online or could work with an insurance agent who can compare policies to find the best one for your needs.

Accidental death coverage can also often be purchased as a life insurance rider, or add-on, to life insurance policies. The coverage can double what your life insurance payout would be if you die as a result of an accident.

Also see:What Is Voluntary Life Insurance?

The cost for AD&D insurance tends to be lower than rates for traditional life insurance because the coverage is limited to accidents. And if your employer offers AD&D insurance, you might be able to get a basic amount as a free benefit.

In general, AD&D insurance costs are tied to the amount of coverage you purchase. For example, monthly premiums might start at $4.50 for every $100,000 in accidental death coverage from Farmers. Rates start at about $8 a month for $100,000 of coverage from Fabric. Because rates can vary from insurer to insurer, it can pay to shop around for the best rate.

Some people mistakenly think that having AD&D insurance is a financial safety net if someone dies unexpectedly. “It gives them a false sense of security,” Voegele says. Because AD&D provides limited coverage, it isn’t right for everyone.

Pros

You don’t have to take a medical exam to get AD&D insurance. And you don’t have to answer questions about your health, which can make this type of policy appealing to people with pre-existing conditions that make it difficult to find affordable life insurance.

You won’t be denied coverage because of your health. You just have to meet the age requirements. Typically, you must be between ages 18 and 70 or 80.

You can get coverage quickly. Because there are no lengthy questionnaires to fill out, no medical exams to take and no waiting period, you can get approved for a policy within a matter of days or even minutes for some policies purchased online.

Cons

Coverage is limited. AD&D will only pay out if the death or injury was a result of an accident—and there are plenty of ways to die other than an accident. This limited coverage is a big drawback.

Coverage isn’t as cheap as it seems. An AD&D policy will cost less than regular life insurance. But that’s because the chance of an AD&D payout is relatively low. “The odds of you using it are so far down the scale that it becomes expensive for the payout,” Voegele says.

You might lose your coverage if you leave your job. Most people who have AD&D insurance get it through a group plan at work, Voegele says. Often, you can’t keep that coverage if you leave your job.

Because it only pays out in the event of an accident, AD&D insurance isn’t ideal for everyone. But don’t turn it down if it’s offered as a free workplace benefit.

“If it’s offered for free, absolutely take it,” Voegele says. “If you have to pay for it, I would recommend that one size does not fit all.”

In other words, consider the value you get for a workplace policy you’d have to pay for to determine if the coverage you’d get would be worth the cost.

A term life insurance policy is usually better coverage than AD&D insurance because it provides a payout for any cause of death (except suicide, generally within the first two years of having the policy). So accidents, heart attacks, strokes and more are all covered under a traditional term life policy.

If you’re young and healthy, you might be able to get a term life policy at a rate that’s not much higher than what you’d pay for AD&D insurance.

You’d also be better off signing up for disability insurance through your employer or getting a policy on your own in case you’re unable to work. Disability insurance will help replace lost wages if you can’t work because of illness as well as an injury.

“I would shy away from accidental death plans because there are so many things that can happen to us that aren’t accidents,” Voegele says. “You need to be covered for anything.”

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