What Is Accidental Death and Dismemberment (AD&D) Insurance?
Accidental death and dismemberment (AD&D) insurance is insurance—usually added as a rider to a health or life insurance policy—that covers the unintentional death or dismemberment of the insured. Dismemberment includes the loss, or the loss of use, of body parts or functions (such as limbs, speech, eyesight, and hearing).
Because of coverage limitations, prospective buyers should carefully read the terms of the policy. For instance, AD&D insurance is limited and generally covers unlikely events. Also, it is supplemental life insurance and is not an acceptable substitute for a full life insurance policy.
Key Takeaways
Accidental death and dismemberment (AD&D) insurance is usually added as a rider to a life insurance policy.
AD&D insurance pays benefits in the case of a person’s accidental death or dismemberment: the loss—or loss of use—of body parts or functions.
AD&D insurance usually comes with significant coverage limitations, so always read the fine print.
AD&D does not pay if the insured died due to natural causes, such as cancer or heart disease.
Known as double indemnity, AD&D may pay a benefit equal to or a multiple of (usually 2x) the regular policy’s face amount.
How Accidental Death and Dismemberment (AD&D) Insurance Works
AD&D insurance contains a schedule that details the terms and percentages of the various benefits and covered special circumstances. For example, if an insured dies from injuries sustained in an accident, the death must occur within a specified period for benefits to be paid.2
Accidental Death
When adding an AD&D rider, also known as a “double indemnity” rider, to a life insurance policy, the designated beneficiaries receive benefits from both the rider and the underlying policy if the insured dies accidentally.
Benefits typically cannot exceed a certain amount, as detailed in the rider. As most AD&D insurance payments mirror the face value of the original life insurance policy, the beneficiary normally receives a benefit twice the amount of the life insurance policy’s face value upon the accidental death of the insured.
Typically, accidental death covers exceptional circumstances, such as exposure to the elements, traffic accidents, homicide, falls, drowning, and accidents involving heavy equipment.
Dismemberment
Most AD&D policies pay a percentage for the loss of a limb, partial or permanent paralysis, or the loss of use of specific body parts, such as the loss of sight, hearing, or speech. The types and extent of injuries covered are particular to and defined by each insurer and policy.
Voluntary AD&D
Voluntary accidental death and dismemberment (VAD&D) insurance is an optional financial protection plan that provides a beneficiary with cash if the policyholder is accidentally killed or loses certain body parts. VAD&D is also a limited form of life insurance and is generally less expensive than a full life insurance policy.3
Premiums are based on the amount of insurance purchased.4 VAD&D insurance is typically purchased by workers in occupations that place them at high risk of physical injury. Most policies are renewed periodically with revised terms.
How much such a policy pays depends not only on the amount of coverage purchased but also on the type of claim filed. For example, the policy might pay 100% if the policyholder is killed or becomes quadriplegic, but only 50% for the loss of a hand or the permanent loss of hearing in one ear or sight in one eye.
Common Exclusions
Each insurance provider includes a list of exclusions. In most instances, the list includes suicide, death from illness or natural causes, and wartime injuries.
Other common exclusions include death resulting from the overdose of toxic substances, death while under the influence of nonprescription drugs, suicide, certain recreational activities, and the injury or death of a professional athlete during a sporting event.
Usually, if the insured’s loss occurs because of a felonious act on his or her part, no benefit is payable. People working in high-risk jobs (such as public safety and the military) may not qualify for AD&D coverage.