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

Accidental death and dismemberment (AD&D) insurance is usually a rider to a health insurance or life insurance policy. The rider 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. Because AD&D insurance is limited and generally covers unlikely events, it is supplemental life insurance and not an acceptable substitute for term life insurance.

Key Takeaways

  • Accidental death and dismemberment (AD&D) insurance usually takes the form of 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.
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Accidental Death And Dismemberment Insurance

Understanding Accidental Death and Dismemberment (AD&D) Insurance

AD&D insurance contains a schedule that details the terms and percentages of the various benefits and covered special circumstances. For example, if an insured dies from injuries sustained in an accident, the death must occur within a specified period for benefits to be paid.

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.

AD&D insurance is supplemental life insurance and not an acceptable substitute for term life insurance.

Dismemberment

Usually, the AD&D policy pays a percentage for the loss of a limb, partial or permanent paralysis, or the loss of use of specific body parts, such as the loss of sight, hearing, or speech. The types and extent of injuries covered are particular to and defined by each insurer and policy. It is uncommon for a policy to pay 100% of the policy amount for anything less than a combination of the loss of a limb and the loss of a major bodily function, such as sight or hearing in at least one eye or ear.

Voluntary AD&D

Voluntary accidental death and dismemberment (VAD&D) insurance is an optional financial protection plan that provides a beneficiary with cash in the event that 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 or sight in one ear or eye.

Special Considerations

Each insurance provider includes a list of circumstances excluded from coverage. In most instances the list consists of suicide, death from illness or natural causes, and injuries from war. Other common exclusions include death resulting from the overdose of toxic substances, death while under the influence of nonprescription drugs, and the injury or death of a professional athlete during a sporting event. Usually, if the insured’s loss occurs because of a felonious act on his or her part, no benefit is payable.