What Is Voluntary Accidental Death and Dismemberment Insurance (VAD&D)?
Voluntary accidental death and dismemberment insurance (VAD&D) is a financial protection plan that provides a beneficiary with cash in the event that the policyholder is accidentally killed or loses a specific body part. VAD&D is a limited form of life insurance and is generally less expensive than a full life insurance policy.
- Voluntary accidental death and dismemberment insurance is similar to a life insurance policy.
- Voluntary accidental death and dismemberment insurance (VAD&D) does not cover all death or injury-related circumstances.
- Some VAD&D insurance benefits only provide coverage up to 10 times an employee's salary.
- VAD&D insurance is not an alternative to life insurance, but it is sometimes attractive to younger workers who do not have the income to support a full life insurance policy.
- VAD&D insurance is often offered as part of an employment package, and can also be purchased as a rider to an ordinary life insurance policy.
Understanding Voluntary Accidental Death and Dismemberment Insurance (VAD&D)
Voluntary accidental death and dismemberment insurance (VAD&D) is an optional benefit offered by some employers. Premiums are based on the amount of coverage purchased, and this type of insurance can make sense for workers in occupations that place them at high risk of physical injury. Most policies are renewed periodically with revised terms, although the client's consent with renewal is often implicitly assumed.
How much the policy will pay in the event of a claim depends not only on the amount of coverage purchased but on the type of claim filed. For example, the policy might pay 100 percent if the policyholder is killed or becomes quadriplegic, but it might only pay 50 percent for the loss of a hand or the permanent loss of sight in one eye.
Types of AD&D and Exemptions
There are four common types of group AD&D plans offered:
- Group Life Supplement, which is included as part of a group life insurance contract and the benefit is typically the same as the group life benefit
- Voluntary AD&D, which is offered to members of a group as separate, elective benefits, and premiums are paid as part of payroll deductions
- Travel accident, which is provided through an employee benefit plan and provides supplemental accident protection to workers while they are traveling on company business
- Dependents, which provides coverage for dependents of employees
Certain death circumstances are excluded from many AD&D policies, including death by illness, suicide, non-commercial radiation, and natural causes.
Death, while under the influence of any non-prescribed drugs or alcohol, is also most likely exempt from coverage.
Overdose with toxic or poisonous substances and injury of an athlete during a professional sporting event may also void the right to a claim. Some insurance carriers are willing to alter their clients' coverage to include some of these risks, but every such extension will typically result in higher premiums for the client.
Advantages and Disadvantages of VAD&D Insurance
The low costs of AD&D insurance could make an attractive addition to conventional life insurance, and many employers offer discounted policies. However, those low premiums also mean low payouts. While it may provide peace of mind, AD&D is no replacement for regular life insurance.
In addition, the terms for claiming AD&D benefits are typically much more restrictive than life insurance coverage. Many policies will not pay out for deaths resulting from illnesses, infection, suicide, scuba diving, or other risky accidents, and you'll have to read the fine print to know when you're covered. The process of claiming an AD&D benefit can be lengthy, and the deceased may undergo an autopsy before benefits are paid out by the insurance company.
In addition, the terms of death are often officially investigated before an insurer approves a claim.
Cheaper than life insurance, with premiums as low as $60 per year
Covers non-fatal injuries, such as blindness, deafness, and lost limbs
May be available at a lower cost through your employer
No medical requirements
Does not cover suicide, self-inflicted injuries, overdoses, or injuries due to certain risky behaviors
Offers comparatively lower payouts than life insurance
May require extensive paperwork and investigation before receiving a payout
Examples of VAD&D Insurance
Accidental death insurance varies widely by policy and jurisdiction. Some plans will also offer more complex benefits, depending on the nature of the insured's death, or partial benefits in the case of disabling injuries. For example, a death in an auto accident may be eligible for a higher payout. Here are some sample policies for a 21-year-old nonsmoking male in Pennsylvania.
Mutual of Omaha offers an Accidental Death policy of $250,000, for a monthly payment of $5.85. Farmers Insurance has a similar policy with a payout of $200,000, for a monthly payment of $10. This payout is increased to as much as $1,000,000 in the event of a death in a common carrier accident. However, Farmers Insurance is available in fewer jurisdictions.
Voluntary Accidental Death and Dismemberment FAQs
Can You Collect Both VAD&D and Life Insurance Benefits?
Yes. In the event of an accidental death that meets the terms of your VAD&D policy, the beneficiaries can collect payouts from both the deceased's life insurance policy and their VAD&D policy.
Do I Need Both Life Insurance and VAD&D?
Voluntary Accidental Death & Dismemberment is considered supplemental to ordinary life insurance. Since there are many ways to die that aren't covered by VAD&D, it's more important to have a life insurance policy.
Does VAD&D Insurance Cover Homicide?
In most cases, the victim of homicide would be covered by Accidental Death and Dismemberment insurance, unless the death resulted from poisoning, drug overdose, or criminal activity by the deceased. It is important to read the fine print of your policy to know which activities may be excluded.
The Bottom Line
Voluntary Accidental Death and Dismemberment (VAD&D) is an affordable, limited form of life insurance that provides a cash benefit in the event of a fatal or disabling accident. Due to the low premiums, VAD&D is sometimes attractive to younger people who may not have the income to support a full life insurance policy. However, VAD&D only pays out in very specific circumstances. While it may be worth getting if your employer provides it, VAD&D is no substitute for a full life insurance policy.