Accidental Death and Dismemberment (AD&D) provides financial protection in case you are involved in an accident that causes death or dismemberment. AD&D insurance is often offered by employers as an alternative to life insurance.
However, because AD&D insurance isn’t nearly as robust as life insurance, it shouldn’t completely replace your life insurance coverage.
AD&D policies are generally cost-effective. If you do need accidental death and dismemberment coverage, it’s best to have separate AD&D and life insurance policies. In most cases, you can also add an AD&D rider to your life insurance policy.
What is accidental death and dismemberment insurance?
AD&D pays out if you die in an accident (the accidental death part of the policy) or if an accident causes you to lose a hand, foot, or limb (the dismemberment part of the policy).
Because AD&D only pays out under specific circumstances, it’s not a sufficient form of life insurance. Whereas AD&D insurance only pays out if you’re injured or killed in an accident, life insurance pays out for most causes of death.
→ Learn more about the difference between life insurance and AD&D insurance
What does accidental death and dismemberment insurance cover?
AD&D insurance generally covers:
Death in an accident, like a car crash or by drowning
Death by murder
Loss of limb or finger
Loss of sight, hearing, or speech
If you’re injured or killed in an accident, you or your family can make a claim with your insurance company. The insurer will then pay a benefit amount based on your injuries (or death), as listed in your policy.
What doesn’t accidental death and dismemberment insurance cover?
AD&D policies have a number of exclusions for accidents. For example, it won’t pay a benefit if your death is the result of something going wrong during a surgery. Individual states also have their own exclusions to AD&D coverage.
AD&D insurance won’t pay out if you die in one of the following ways:
Activities considered high risk by insurers, such as skydiving
Drug overdose
Drunk driving
Illness, such as a heart attack
Natural causes
Suicide
At the end of the day, an AD&D insurance policy won’t pay out for most causes of death. Policies will only pay out from accidents.
The cost of AD&D insurance
An AD&D policy usually costs $7 to $10 per month per $100,000 of coverage, but how much you actually pay for AD&D insurance depends on your age. The older you are, the higher your premiums — much like most other types of insurance.
Regardless, AD&D insurance tends to cost less than a traditional term life insurance policy — but comes with the caveat of coverage limitations and a big chance that your family won’t ever receive the benefit.
There’s a high likelihood that traditional life insurance will pay out compared to an AD&D policy, so a traditional term life insurance policy generally offers more value for its cost.
→ Average life insurance cost per month
Who needs accidental death and dismemberment insurance?
AD&D insurance is best suited for anyone on a tight budget with dependents who would financially suffer in the event of your impairment or death.
It can be a valuable financial safeguard if you cannot afford traditional life insurance, as it costs less. There is no medical underwriting, and anyone can buy a policy as long as they meet age requirements.
Alternatives to AD&D insurance
The best alternative to a standalone AD&D insurance plan on top of your insurance policies is an AD&D rider that you can add on to your life insurance policy for an extra fee.
The AD&D rider offers a bigger payout than your standard death benefit if your cause of death is an accident that the rider covers. The rider will also pay a set amount if you lose a limb or digit from a covered accident but do not die.
Costs of accidental death benefit riders vary by insurance company and policy, but $50,000 of coverage would likely cost less than $100 extra per year, or about $8 per month — which isn’t that much more than a standalone policy.
Is AD&D insurance worth it?
As a standalone policy, AD&D insurance doesn’t provide robust enough coverage. Life insurance and disability insurance provide better security and don’t have payout limitations like AD&D insurance does.
If you can afford it, adding a supplemental AD&D rider to your life insurance policy creates even more comprehensive coverage that would pay out even if you survived an accident.
But if you’re unable to afford a traditional life insurance policy, AD&D insurance is a good alternative. Because of its low cost, it ensures that you have at least some coverage to financially protect your family if you become impaired or die in an accident.
