Accidents happen. In fact, they’re the third leading cause of death in the U.S. according to the National Center for Health Statistics. An accident can change everything.
One option to protect you and your loved ones from the financial consequences of an accident is accidental death and dismemberment insurance. It can provide financial resources if a limb is lost due to an accident. It can also help your family by paying a death benefit if the unthinkable happens.
Understanding the difference between life insurance and accidental death and dismemberment insurance can help you decide which policy is right for you.
What Is Accidental Death Insurance?
Accidental death and dismemberment insurance, often shortened to AD&D, pays a financial benefit if you die or lose limbs or bodily functions in a covered accident. The accidental death insurance policy is often available as a rider to life insurance. But, it’s also available as a separate policy.
How much is paid out depends on the type of injury and loss you experience. For example, your beneficiaries can receive the full value of the policy if your death results from an accident. But the insurer might only pay 50% of the policy value if you lose a hand, foot, or sight in one eye.
What does Accidental Death and Dismemberment Insurance Cover?
An accidental life insurance policy is a limited type of life insurance that only covers accidents. You might think of it as “accident expense insurance” because it can help to cover living expenses for you or your loved ones if tragedy strikes.
A typical policy can cover accidents resulting in death or dismemberment from:
- Exposure to the elements
- Traffic accidents
- Heavy equipment accidents
It’s meant to provide financial protection from situations out of your control and to provide financial security if the worst should happen.
What isn’t covered?
What you consider an “accident” might not be the same definition required by the insurance company. Even the best accidental life insurance policies don’t cover every type of misfortune.
Most policies have a long list of exclusions. Typically, insurance companies wouldn’t cover death or dismemberment from:
- Drinking and driving
- Natural causes
- Physical illness
- High-risk activities, such as skydiving
- Suicide or attempted suicide
- Drug overdose
Generally, a death from a covered event must occur within a specific amount of time after the accident. Otherwise, it might not be covered and the insurance company wouldn’t issue a payment.
Where to Buy AD&D Insurance
You have a few options to purchase AD&D insurance. If you already have life insurance, you might be able to add it to your current policy.
If you work for a company, there’s a good chance you can buy AD&D coverage from your employer. According to the Society for Human Resources Management’s 2019 Employee Benefits Survey, 83% of companies offer accidental life insurance policies.
You can buy accidental death insurance online as stand-alone coverage from many insurers. A separate policy is a good option if you are unable to add it to a life insurance policy or can’t purchase it through your workplace.
Accidental Death Life Insurance Rates
The cost of accidental death insurance is relatively low when compared to other life insurance options, such as whole life insurance. Premiums are cheaper because the policy pays out death benefits only when death occurs due to accidents.
How much you pay for AD&D insurance depends on the amount of coverage you purchase. The cost can also vary from one company to the next, which is why shopping around for an accidental death insurance quote can save you money.
Buying $50,000 of coverage might cost about $8 to $15 per month. Compare that to a whole life policy that could cost $215 per month or more, and you’ll see why AD&D insurance can be a good value.
Accidental Death and Dismemberment vs Life Insurance
AD&D insurance is a very limited form of life insurance, but it isn’t the same as term, whole, or universal life policies. Those types of life insurance provide financial protection for your family in most cases of death, including accidental death. With life insurance, your beneficiaries will receive a death benefit whether you die from an accident, illness, or natural causes.
The difference between term life insurance and accidental life policy is that AD&D insurance pays a death benefit only if your death was caused by an accident. However, it also covers dismemberment, which life insurance doesn’t. You could get a payout if you lose a finger, hand, hearing, or eyesight.
When considering accidental death coverage vs life insurance, remember that AD&D coverage is not a replacement for life insurance. Many people should buy both types of policies. Accident insurance is generally less expensive, but even the best accident insurance isn’t designed as a substitute for life insurance.
Should You Get Accidental Death Coverage?
Accidental death can impact your loved ones emotionally as well as financially. Even the loss of a limb or your hearing or sight could be an emotional and financial hurdle for you and your family. Accidental death and dismemberment coverage can provide cash when it’s needed the most.
When considering life insurance versus accidental death, consider these pros and cons:
Pros of AD&D Insurance:
- You don’t need a medical exam. An AD&D policy is appealing if you have a pre-existing condition that might prohibit finding traditional life insurance at an affordable price.
- You can get fast coverage. No lengthy questionnaires, medical exams, or waiting periods means you can buy AD&D insurance online quickly.
- Your family could receive an extra financial benefit. Known as double indemnity, your beneficiaries can get paid the full value of your life insurance policy and the full value of your AD&D rider if your death is an accident.
Cons of AD&D Insurance:
- Your coverage is limited. AD&D insurance pays a benefit only if your loss is from an accident.
- You could lose your coverage if you switch jobs. Many people get their AD&D policy through their employer. If you leave your job, you may not be able to take your coverage with you.
Get Personalized Life and Accident Insurance
Now that you know what is accidental death insurance, you might think it’s a wise investment. A life insurance accidental death benefit can financially protect your family if your death or loss of a bodily function is from an accident. However, when considering accidental death insurance vs life insurance, remember that most people need both. You might purchase life and AD&D insurance from the same company.
But even the best accident insurance policy isn’t right for everyone, and it isn’t a replacement for life insurance. You should still have life insurance to financially protect your family, regardless of the cause of death.
Get a quote in minutes using Sproutt’s online quoting tool to discover the best coverage for you and your situation. And if you have questions, our professional life insurance advisors are here to help, every step of the way.