Accidental Death & Dismemberment Insurance: What is it, and Do I Need it?


Understanding the basics of life insurance is complicated enough, but you got it! You’ve figured out the difference between whole life vs. term life insurance, decided on who your beneficiaries will be, and calculated the perfect payout amount. Finally, rest assured that you’re family will be completely protected financially, no matter what.

That is, until you find out about even more forms of insurance, like accidental death & dismemberment insurance. Now even more questions come to mind. Is accidental death & dismemberment insurance (also called AD&D insurance) really something I need? Can it be a replacement for term life insurance coverage? And what does it actually do?

Though it may initially sound complicated, getting to know the benefits and the limitations of AD&D insurance is essential in ensuring optimal coverage. Let’s dig into exactly what AD&D insurance is and whether acquiring it is the right choice for your family.

What Is Accidental Death & Dismemberment Insurance

As the name implies, accidental death & dismemberment insurance is a policy that pays out in the event of the policyholder’s accidental death or dismemberment. AD&D insurance provides an extra level of financial security often needed in the event of an unexpected tragedy. It can be offered through a workplace, as an addition to an existing policy, or purchased as a standalone policy.

That part is straight forward enough, right? It’s from here that things become a bit more complicated.

In the event of the policyholder’s accidental passing, the chosen beneficiary will receive 100% of the death benefit. In the event of a dismemberment, the policyholder will receive all or a portion of the total death benefit, depending on the severity of the injury.

What Qualifies as an Accidental Death

First off, what counts as an accidental death? Though policies do differ, accidental deaths are typically caused by sudden, unpredictable incidents unrelated to health. Passing away due to a car crash or workplace accident would qualify, but death from a heart attack or cancer would not.

Others manners of death not considered accidental include:

  • Any physical or mental illness

  • Suicide

  • Risky behavior like skydiving, rock climbing, bungee jumping, etc.

  • Nonprescription drug overdose

  • Actively fighting in a war

  • While committing an illegal activity

Beneficiaries also may not qualify for a payout if the death created an accident, but that accident wasn’t the actual cause of death—like a man falling from a ladder after suffering a stroke. If the man died from the stroke, it wouldn’t be considered accidental.

In addition, there is usually a window of time post-accident in which the policyholder must pass away for the death to be considered accidental, though this time frame can vary.

What Qualifies as Dismemberment?

Sustaining an accidental injury that causes the loss of a significant part of your body is considered a dismemberment. This includes everything from the loss of hearing or eyesight, losing one or more limbs, losing the ability to walk, etc.

Often called a scheduled benefit, insurance companies will pay out a portion of, or the entirety of, the benefit based on the severity of the dismemberment. For example, losing both legs likely means a full payout. Losing a thumb and index finger on the same hand may qualify for 25%. Losing a pinky toe may not qualify for any payout.

Though policies vary, here’s a general breakdown of likely scheduled benefits for dismemberment:

Dismemberment Benefit Examples

Type of Dismemberment Portion of Benefit Payable
Quadriplegia 100%
Total Vision Loss 100%
Loss of Two or More Limbs 100%
Paraplegia 75%
Loss of One Limb 50%
Loss of Thumb & Index Finger 25%

AD&D Insurance vs Term Life Insurance

The critical difference between AD&D insurance and term life insurance is that with term life, beneficiaries receive the full death benefit no matter the cause of death, with a few exceptions like suicide before the suicide clause has expired. There are many limitations as to what qualifies for a payout with AD&D insurance.

Since there are fewer restrictions with even low-cost term life insurance, chances are higher that life insurance company will pay eventually out. Because of this, though still affordable, policies often cost more for term life insurance vs AD&D insurance. Since providing AD&D insurance is less of a gamble, they’re willing to offer affordable options.

Another benefit of AD&D insurance is its coverage of more than just death. A permanent disability can drastically alter your family’s financial stability. For instance, if you were a personal trainer, losing an arm may not keep you from working forever. However, receiving a substantial chunk of money to help support your family while determining next steps would be a godsend.

Should I Purchase AD&D Insurance?

If you’re looking for an easy, low-cost supplement to a current or new life insurance policy, an AD&D policy can be a great option. As accidental death and dismemberment is relatively rare, monthly premiums for AD&D insurance are often low. Also, as long as you meet the age requirement, expect to be approved automatically—no matter your medical history.

However, we do recommend against using AD&D insurance as your sole life insurance policy. Yes— more people between the ages of 18 and 44 die from accidental deaths than from anything else, and many mothers do fall into that age range. Still, thousands pass away every year for countless other reasons too. With such a limited scope of what qualifies as accidental, the slightly lower price tag is never worth risking your family’s future.

In short, acquiring AD&D insurance shouldn’t be your one and only answer to financially protecting your family. However, if it’s offered through your workplace, as a life insurance add-on, and/or your job is considered high-risk, it’s absolutely worth considering. After all, why not include an extra level of protection for the ones you love the most?

Tom RedingComment