What Is Accidental Death and Dismemberment Insurance?

Accidental death and dismemberment (AD&D) insurance provides coverage for a family if the unthinkable occurs. If death or dismemberment due to an accident happens, AD&D insurance kicks in for the insured. However, there are some exclusions.

WHAT IS ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE?

As the name suggests, AD&D insurance provides coverage due to death or dismemberment resulting from a qualifying accident. Generally, the beneficiaries named on the policy receive a lump-sum payment if the insured dies due to an accident covered by the policy.

If dismemberment occurs due to a covered event, most policies payout 50% to 100% based on the type of injury and level of dismemberment. Dismemberment includes loss of limbs, eyesight, speech, and hearing. If you lose one limb or one sense (eyesight, speech, or hearing), the policy typically pays 50%. If you lose two limbs or more than one sense, then the full benefit is usually paid. Policies frequently payout following coma and partial or total paralysis in the range of 25% to 50%.   

WHAT IS COVERED BY AD&D INSURANCE?

Only injury or death of the insured due to an accident is covered under AD&D insurance. The death or injury must be a direct result of the accident. Death due to illnesses or natural causes are not covered (a more extensive list of exclusions is discussed in the next section).

Injuries at home, work, and while traveling are generally covered. If the insured’s death is the direct result of an accident while traveling on public transportation, some policies pay out two or three times the coverage level.

Death does not need to be instantaneous for AD&D coverage to kick in. However, death does need to occur within a certain amount of time following the accident, typically within a few months.

Some insurers offer optional AD&D coverage for a spouse and children. The option for an additional payout if the insured is wearing a seatbelt during a vehicle accident that resulted in death or dismemberment is also offered by some insurers. Financial advising, legal advice, or counseling for a surviving spouse can be added to some policies, as well. Some policies also offer optional hospital stay coverage following an accident. 

WHAT ARE EXCLUSIONS FOR AD&D INSURANCE?

As with any insurance policy, exclusions apply to accidental death and dismemberment insurance. Exclusions vary from company to company, so it is essential to read your policy's fine print for a full listing.

Typical exclusions include death or dismemberment from:

• A surgical procedure (including during surgery)
• A mental or physical illness
• Skydiving
• Scuba diving
• Hernias
• Bacterial infections
• Car racing
• War and riots
• Drunk driving
• Drug overdose
• Injuries that occur before coverage begins
• Suicide or self-inflicted injuries
• Heart attacks
• Strokes
• Flying a plane
• Playing professional sports
• Injuries incurred while serving in the armed forces
• Bungee jumping

HOW MUCH DOES AD&D INSURANCE COST?

AD&D insurance pricing is tied to the level of coverage purchased. For example, you might pay as little as $4.50 per month for every $100,000 in coverage and $25 per month for every $500,000 in coverage from an insurance provider. It is possible to pay as little as $50 per year for AD&D coverage, depending on the policy, coverage level, insurer, and risk level of the insured. As discussed later, many employers offer a basic level of AD&D insurance for free to employees who enroll in coverage.

In general, AD&D insurance is one of the lowest priced insurance coverages available and is priced lower than traditional life insurance policies. AD&D insurance doesn’t provide an extensive amount of coverage and is limited to accidents, which is one reason why it is priced so low. The chances of a payout from AD&D life insurance are relatively low. 

HOW CAN YOU PURCHASE AD&D INSURANCE?

Fortunately, you do not have to take a medical exam to secure AD&D insurance. Therefore, you don’t need to worry about being denied coverage due to your health status. As long as you’re between the ages of 18 and 80, it is highly probable that you can quickly secure AD&D coverage.

Individuals can purchase AD&D insurance through their employer if it is offered as part of the company’s benefits platform. The other option is for individuals to buy a policy on their own.

AD&D INSURANCE FROM AN EMPLOYER

Employees often have the option to enroll in group AD&D coverage offered through their employer. According to the Society for Human Resource Management (SHRM) 2019 Benefits Executive Summary, 83% of employers offer accidental death and dismemberment insurance. Many employers provide AD&D insurance at no cost to employees.

For additional coverage, employees can typically purchase additional AD&D coverage through the group plan if they are not satisfied with the level provided for free by their employer. The cost of AD&D insurance through an employer is often less than what it might be for an individual policy. The downfall, however, is that you most likely lose the coverage when you leave the organization, or your employment status changes and you no longer qualify for employer benefits. 

INDIVIDUAL AD&D POLICIES

Most major insurance carriers offer AD&D insurance, and many life insurance companies offer AD&D insurance in addition to life insurance. Some credit unions and credit card companies also offer AD&D insurance coverage.

Individuals can purchase AD&D insurance policies through an independent insurance broker or agent. They can also buy them directly from the insurance company.

It is usually possible to add AD&D coverage as an endorsement, or rider, to a life insurance policy. Doing so may double your life insurance coverage payout if you die due to an accident.

Accidental death and dismemberment insurance should not be considered a substitute for life insurance, however. Life insurance offers more extensive coverage and protection than an AD&D insurance policy. It’s important to know that AD&D insurance coverage is limited to accidents.

Working with an insurance broker helps to make purchasing an individual AD&D insurance policy a simple process. Brokers have access to numerous insurance agencies, so they can shop around and provide the best plan options to meet your needs at the best price possible.

WHY DO EMPLOYERS OFFER AD&D INSURANCE?

AD&D insurance is a common workplace benefit offered by employers. It is a relatively low-cost benefit for employers to secure. Also, offering it for free or low-cost adds value to a comprehensive benefits platform that employees appreciate.

IS AD&D INSURANCE WORTH IT?

Life insurance and disability insurance provide more coverage than AD&D insurance does. In most cases, AD&D insurance coverage should be thought of as a supplemental insurance policy.

For those trying to decide between life insurance and AD&D insurance, life insurance is generally the better option. Life insurance pays out for death due to any reason, with a few exclusions. 

However, there are many reasons why it might make sense to purchase an AD&D policy:

• You don’t have a life insurance policy, either because you can’t afford one or have pre-existing conditions that prevent you from securing one.
• You work in a high-risk job.
• You get it for free as part of your employee benefits.
• It gives you peace of mind as a way to protect your family if the unthinkable were to happen.

WORK WITH AN AD&D INSURANCE BROKER

KBI works with individuals and employers to secure the right insurance policies to meet their needs and budget, including AD&D insurance. If you’re in the market for AD&D insurance, or you’re trying to determine if it is the right type of coverage for you, KBI can help.

Our team of benefits brokers has extensive experience working with AD&D insurers to bring the best and most affordable policies to the people we serve. 

Contact us today by submitting our online contact form or calling us at 408.366.8880. We look forward to working with you!