Accidental death and dismemberment insurance

Accidental death insurance can help provide for your loved ones if you’re injured in an accident. But if you want to make sure your family is covered no matter what happens to you, you may be better off with a traditional life insurance policy.

What is AD&D insurance?

AD&D insurance is made up of two types of coverage: an accidental death policy that pays out a lump sum to your beneficiaries if you die in an accident, and a dismemberment policy that pays out if lose a limb, finger or toe in an accident.

While AD&D insurance pays out if you die or are seriously injured or paralyzed in an accident, it won’t pay if you die from an illness, disease or underlying medical condition.

What’s an AD&D rider?

Along with offering standalone policies, many insurers allow you to add an AD&D rider to your life insurance coverage for a fee. With this rider, your beneficiaries will receive an additional payout if you die in an accident as specified in the policy. And if you lose a limb or digit as a result of a covered accident, you’ll receive a payment while you’re still alive.

When does AD&D pay out?

Typically, AD&D policies only kick in if you’re killed or injured in an accident. But if you’re injured, you may only receive a portion of the benefit.

Say you lose an arm in an accident. You might get 50% of your policy’s proceeds. If you lose a thumb, you could get 25%. The exact payouts vary between insurers, and will be listed in your policy.

	Does AD&D apply?
Death from an accident, like a car crash
Loss of sight, hearing or a limb due to an accident	Partial payout
Loss of a hand, foot, fingers or toes due to an accident	Partial payout
Loss of two limbs
Quadriplegia as the result of an accident
Paraplegia as the result of an accident	Partial payout
Death due to disease or illness
Death caused by a drug overdose
Death by suicide

How much AD&D insurance can I buy?

AD&D policies are typically available in coverage amounts up to $500,000. To compare, many life insurance companies will offer term or permanent coverage worth $1 million or more.

Costs of AD&D insurance

Since its scope is limited, AD&D insurance usually costs less than a term life insurance policy of the same length.

To give you an idea of how much you might pay for coverage, a healthy 30-year-old woman could get a $500,000, 30-year policy for around $30 a month, according to Fabric’s quoting tool.

In comparison, she would pay $23.06 a month for a term life policy of equal value. While it wouldn’t pay out if she was injured in an accident, it would pay a guaranteed death benefit if she died due to an accident or natural causes.

An AD&D rider could cost as little as a few dollars extra per month, depending on how much coverage you get.

How common are accidental deaths?

According to the CDC’s latest mortality data, accidental death is the third leading cause of death, with 169,936 passing away from unintentional injuries in 2017 alone.

The CDC says people between the age of 25 and 34 are at the highest risk for dying from an accident, closely followed by those in the 45–54 range.

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How is accidental death insurance different from life insurance?

Though life insurance will cover dying in an accident, it can also pay out if the insured is diagnosed with a terminal illness or dies from a disease or medical cause. It’s generally more expensive than accidental death insurance, but your family will be taken care of no matter how you die. Since the coverage is more comprehensive, life insurance is more expensive than AD&D insurance.

Along with being cheaper, accidental death insurance is easier to qualify for, making it a popular option for people who aren’t eligible for a life insurance policy. The application is simpler, too. You won’t need to take a medical exam, and some providers can even offer same-day coverage.

Additionally, life insurance doesn’t cover losing a limb or eye, while AD&D insurance does.

AD&D insurance vs. disability insurance

Disability insurance replaces a percentage of your income if you become fully or partially disabled and can no longer work. The key difference between the two types of coverage is that disability insurance covers illness as well as injury. Given that illness is the major cause of disability, a disability policy is likely to apply to more situations than an AD&D policy.

AD&D insurance vs. accident insurance

Accident coverage is a component of AD&D insurance, but you can also purchase a standalone policy with less restrictions. Also known as “personal accident insurance” or “supplemental accident insurance,” this policy pays out a lump sum if you die or get injured in an accident — even if the injury isn’t serious. To compare, AD&D insurance only pays out if you sustain a serious injury or die in an accident. While accident insurance can provide protection, the benefit limits are typically low. If you can afford the extra costs, it works best as a supplement to your health insurance or disability insurance.

How are premiums determined?

Your premiums will be based on how likely you are to die in an accident. Your insurer will factor in your:

• Age. Some age groups are statistically more likely to die in an accident.
• Gender. Men will generally have higher premiums.
• Occupation. Applicants with high-risk occupations will likely pay more for insurance.
• Hobbies. People with high-risk hobbies, like motorcycle riding and rock climbing, will typically pay more.
• Policy. The amount you’re insured for, how often you make payments and what benefits your plan offers will all affect your premiums.

What should I look for in a policy?

These are the key features to look for when comparing policies:

• Benefit amount. Decide how much coverage you need and look for a company that issues policies with that face value.
• Guaranteed acceptance. Many insurers will allow you to skip both the medical exam and health questionnaire.
• Guaranteed renewable. Some policies guarantee that you’ll be eligible for renewal if you make your payments on time.
• Worldwide coverage. Look for a policy that covers you anywhere in the world so that your loved ones will be protected if you’re in an accident while traveling.
• Seat belt benefit. Some policies pay an additional amount if the policyholder dies as a result of a car accident in which they were wearing a seat belt.
• Child care benefit. This benefit pays an additional lump sum each year for a set number of years to help your spouse with childcare if you die.
• Indexation. Look for a policy with a benefit that increases each year to keep up with inflation.
• Discounts. Some companies will offer a discount if you take out joint coverage with a spouse, increase your level of coverage or bundle it with your other insurance policies from the same company.

When am I not covered?

Exclusions will vary from policy to policy, so read the policy documents carefully before signing. Common exclusions include death or dismemberment by:

To collect the death benefit, your beneficiaries will need to prove that a) your death was directly caused by an accident and b) occurred within a certain timeframe after the accident. The limit is usually three months.

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Bottom line

Accidental death insurance can provide peace of mind for people who don’t qualify for or can’t afford traditional life insurance. But if you’re relatively healthy, you may be better off comparing life insurance policies to find a more comprehensive option that fits your budget. And if you already have life insurance, an accidental death policy could supplement your current policy or other products like health insurance, disability insurance or accident insurance.

Frequently asked questions about accidental death insurance

• How is accidental death insurance taxed?

  Like life insurance, your premium payments aren’t tax-deductible. But in most cases, the payout will be tax-free.

• What information do I need to apply for accidental death insurance?

  The application process will vary between insurers, but you’ll generally be asked questions about:

  • Personal details. This includes your full name, age, gender and/or sex, email address, physical address and phone number.
  • Your hobbies. Some insurers will ask you a few questions about your hobbies to help develop a clearer risk profile.
  • Your occupation. Include information about your main job as well as any part-time jobs or side hustles.
  • Your beneficiaries. The insurer will need personal information for your beneficiaries.
  • Your payment details. Depending on your insurer, you may be able to pay with a bank deposit, credit card, debit card or check.

  Once your application has been submitted, the insurer will process it and contact you as soon as possible (usually within 72 hours) to advise you whether your application has been accepted or if more information is required.

• Can my premiums change once my policy has started?

  It depends. Some policies may stipulate that your premiums will go up each year. But your insurer can’t suddenly raise your rates if you start a new hobby or get injured.

• Is accidental death insurance the same as personal accident insurance?

  No. Personal accident insurance is designed to cover injuries that occur as a result of an accident. Accidental death life insurance is generally catered towards protecting your family members in the event of you passing away, although injuries are sometimes covered.