What is accidental death and dismemberment (AD&D) insurance?
– Definition: AD&D insurance provides a cash benefit when the insured dies from an accident or suffers specified severe physical losses (dismemberment). “Dismemberment” means the permanent loss, or permanent loss of use, of defined body parts or functions (for example, a limb, sight, hearing, or speech).
– Relationship to life insurance: AD&D is typically supplemental to a life policy. It does not replace ordinary life insurance because it only pays for certain kinds of injury or death.
Key terms (defined)
– Rider: An add‑on to an existing insurance policy that modifies its coverage (for example, an AD&D rider on a life policy).
– Face value / death benefit: The principal dollar amount the life policy will pay on death. An AD&D rider often pays a percentage or multiple of that amount for covered events.
– Beneficiary: The person(s) who receive(s) the benefit when the insured dies.
– Double indemnity: A common feature where an AD&D rider doubles the life policy’s death benefit if the death is accidental (subject to policy terms).
How AD&D works — step‑by‑step
1. Check the policy schedule: AD&D contracts include a schedule listing covered losses and the percentage of the policy’s benefit payable for each (for example, 100% for accidental death, 50% for loss of a single hand).
2. Confirm the event is covered: The death or injury must meet the insurer’s definition of “accidental” and usually must occur within a specified timeframe after the incident.
3. File a claim: Beneficiaries or the insured submit evidence (police reports, medical records, proof of loss) to the insurer.
4. Insurer review and payout: The insurer verifies coverage and exclusions, then pays the benefit amount defined in the schedule.
Common exclusions (typical — check any specific policy)
– Death from illness, natural causes, or heart attack (generally not covered).
– Suicide.
– Injuries from wartime acts or declared military service (often excluded).
– Overdose of toxic substances, death while intoxicated, or while using non‑prescription drugs.
– Injuries sustained while committing a felony.
– Some policies exclude professional athletes or high‑risk occupations, and some employers exclude employees in certain roles.
Voluntary AD&D (VAD&D)
– Voluntary AD&D is an optional group plan often offered through employers. Employees can buy protection at low cost, with premiums based on the selected coverage amount. Group VAD&D frequently requires no medical exam and is commonly used by workers in higher‑risk jobs. However, coverage usually terminates or must be converted when employees leave the job.
Advantages and disadvantages — quick summary
Advantages
– Low cost relative to full life insurance, because coverage is limited to specified accidental events.
– Often no medical exam required, especially for group plans.
– Can supplement a life policy to increase the payout for accidental death (double indemnity).
Disadvantages
– Very limited coverage: many common causes of death (heart disease, cancer, illness) are excluded.
– Low probability of payout for many people, since accidental causes are a minority of deaths.
– Group coverage may end when employment ends; portability varies.
– Premiums paid for excluded events are forfeited.
Checklist before buying AD&D
– Who is covered (you, spouse, dependents)?
– Which events are covered and how does the schedule allocate payouts (percentages for each loss)?
– What is the required timeframe to prove the death was accident‑related?
– What exclusions apply (e.g., drugs, suicide, war, felonies, professional sports)?
– Is the plan group or individual, and is it portable if you leave your employer?
– How do AD&D benefits coordinate with your primary life insurance?
– What documentation will be needed to file a claim?
– What is the premium and how often does it renew or change?
Worked numeric example (hypothetical)
Assumptions:
– You have a life insurance policy with a face value of $200,000.
– You add an AD&D rider that pays 100% for accidental death and 50% for the loss of a single hand or sight in one eye.
Examples:
1) Accidental death: If you die in a covered accident and that death meets the policy’s timing and cause requirements, beneficiaries receive the life policy amount plus the AD&D benefit. Payout = $200,000 (life) + $200,000 (AD&D rider at 100%) = $400,000 total.
2) Loss of one hand: If you survive the accident but suffer the covered loss of one hand, the AD&D rider pays 50% of the face value: 0.50 × $200,000 = $100,000. This is a one‑time benefit for that specific dismemberment, not a death benefit.
Notes and assumptions in the example: Actual percentages and payout rules vary by insurer and contract. Some riders pay a fixed schedule with different percentages for each type of loss; always read the policy schedule.
Does AD&D cover heart attacks?
– No, in most policies a heart attack is considered a natural cause of death and is typically excluded from AD&D coverage. For heart‑related protection, a standard life insurance policy is the appropriate product.
How much does AD&D cost?
– Cost depends on the amount of coverage and whether the plan is group or individual. Group or employer‑sponsored AD&D is often inexpensive (sometimes a few dollars per month), while individually purchased AD&D typically still costs less than full life insurance for the same face amount. Exact premiums vary by insurer, coverage level, and risk class.
Practical takeaways
– AD&D is best viewed as a low‑cost supplement to traditional life insurance, not a replacement.
– Carefully review the policy schedule and exclusions to understand when benefits will be paid.
– If you rely on employer coverage, check portability and whether you can convert or replace the coverage if you change jobs.
Reputable sources for further reading
– Investopedia — Accidental Death and Dismemberment (AD&D) Insurance: https://www.investopedia.com/terms/a/accidental-death-dismemberment-insurance.asp
– Centers for Disease Control and Prevention (CDC) — Leading Causes of Death: https://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm
– National Association of Insurance Commissioners (NAIC) — Consumer’s Guide to Life Insurance: https://content.naic.org/consumer_life_insurance.htm
Educational disclaimer
This explainer is for educational purposes only and does not constitute individualized insurance, legal, or financial advice. Policy terms and regulations vary; consult your insurer or a licensed professional before buying coverage.