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AD&D vs Life Insurance

Life Insurance
Auto accidents may lead you to qualify for a higher death benefit or a dismemberment payment.

Life insurance can be a powerful tool for avoiding hardship when tragedy strikes. While basic life insurance protection is essential for replacing income and keeping financial goals within reach, enhancing your coverage with accidental death and dismemberment insurance could make sense.

Accidental coverage, also known as AD&D, can offer additional insurance when unexpected events occur. But it's important to understand how this optional protection works and where it might fit with your strategy. Let's dive into the details and explore using AD&D versus life insurance without accidental coverage.

Key Takeaways

  • AD&D riders can enhance protection for standard life insurance policies.
  • You may be eligible for benefits even if you're injured (and don't die in an accident).
  • Many accidents are covered, but some exclusions and limitations apply.
  • AD&D is best viewed as a supplement to a complete life insurance strategy.

What Is an AD&D Rider?

An AD&D rider provides additional protection against deaths and injuries covered by a life insurance policy. With AD&D coverage, you or your beneficiaries can receive a payout that is larger than a life insurance policy's standard death benefit. This form of coverage might also enable you to receive a payment due to specific injuries.

Insurance with an AD&D rider can potentially double the policy's primary death benefit if you die as a result of a covered accident. That additional payment is sometimes known as a multiplier. However, if you survive an accident but lose certain vital functionality, the payment instead is often a percentage of the policy's death benefit.

Here's an example: Say the death benefit on a life insurance policy is $250,000 and the multiplier is two when an accidental death occurs. In that case, your beneficiaries could potentially receive up to $500,000 if you die in a covered accident. In another scenario using the same policy, if you were to lose one limb or sight in one eye in a covered accident, AD&D coverage may pay you a specific portion of the death benefit, such as 50% (or $125,000).

The exact amount you or your beneficiaries will receive depends on your insurer's policies and the nature of your accident. Different insurers pay different amounts across various benefit situations. And when losses are combined, such as losing sight in both eyes or an arm and a leg, the benefit can increase. 

What Does AD&D Coverage Include?

Life insurance policies already pay a death benefit when an insured person dies while the contract is in force. But with an AD&D rider, you can potentially increase the coverage significantly and secure other benefits. AD&D is specifically designed for accidental death and injuries. Coverage might include the following:

  • Automobile accidents
  • Plane crashes
  • Workplace injuries
  • Falls and accidents around the home

Review your policy carefully to ensure you are eligible for certain events.

Understanding Dismemberment Eligibility

Dismemberment can include various conditions. These are common ones covered by most policies:

  • Loss of a limb or fingers
  • Loss of hearing in one or both ears
  • Loss of sight in one or both eyes
  • Loss of speech
  • Permanent paralysis
  • A combination of the conditions above

When Would an AD&D Policy Pay More?

For an AD&D rider to pay extra, a covered accident must occur. Also, the loss (whether you die or are dismembered) typically must occur within a limited time. For example, after a vehicle accident, a policy might only pay the AD&D multiplier if you die within 90 days and the death can be linked directly to the event.

But what if you're injured in an accident and it's more than 90 days before you experience a loss? In some cases, doctors might spend a tremendous amount of time and effort to help you recover, whether that means saving your life or working on securing the quality of life you want. If it turns out that you die of a cause that is ultimately related to an accident but outside of the 90-day window, your beneficiaries would not receive benefits from AD&D coverage. The rules are usually similar for dismemberment as well.

What Is Not Covered By an AD&D Policy?

AD&D coverage is only for accidental losses. Death from illness or natural causes is not covered.

It's important to consider your job and any hobbies if you're thinking of using AD&D insurance. Depending on your insurer, you might or might not be covered for things like:

  • High-risk jobs (firefighter or pilot, for example)
  • Risky hobbies (skydiving, scuba diving, or base jumping)
  • Self-inflicted wounds
  • Acts of war
  • Injuries while under the influence of alcohol or nonprescription drugs

Costs for AD&D Coverage

AD&D riders are relatively inexpensive. You may pay only a few dollars per month (or less) to add an AD&D rider. The cost is relatively low because the likelihood of a payout is also low. There's a relatively small chance that you'll die or suffer serious injuries as a result of an accident. Plus, policy limitations or exclusions further reduce the risk insurance companies take. Because of that somewhat low risk, insurers can offer coverage at a low price.

In turn, AD&D coverage might be a reasonable solution to consider when you can't buy a standard life insurance policy due to existing health issues. You'll get at least some protection against accidental losses, but there's no guarantee that the policy will ever pay out.

Benefits of AD&D Coverage

Accidental coverage can supplement your existing insurance protection and provide several benefits:

  • It's easy to qualify. You typically do not need to complete a medical exam or answer additional medical questions for AD&D coverage.
  • There are benefits for nonfatal accidents. If you are dismembered in a covered accident, you will likely need money for medical care, home modifications and equipment to help you adjust. What's more, you may need cash on hand to replace your income while you recover. AD&D coverage might provide money that you can use for any needs that arise.
  • It's inexpensive. As explained, AD&D coverage often has a low cost.

Potential AD&D Drawbacks to Consider

While an influx of additional money is usually welcome when tragedy strikes, AD&D is not the solution for every problem. Here are a few potential drawbacks to weigh:

  • Only covered accidents qualify. You only receive benefits when a covered accident occurs. Illness can also cause harm, but policy exclusions might limit the benefits of this coverage.
  • Your coverage might be tied to your job. In some cases, coverage is linked to your employment. If you leave your job, you might lose coverage. It may be possible to pay premiums and take the coverage with you, so be sure to ask during while conducting your initial research.
  • There are limitations and exclusions. Some jobs and risky activities are not covered by AD&D insurance. If your accident is not covered, you or your beneficiaries won't receive a payout.

How AD&D Riders Work

A rider is an optional feature you can add to life insurance contracts, often at an additional cost. If you like the idea of additional coverage, you can choose the option of adding AD&D. However, it's first important to verify if the option is available and when you're able to add it to a policy. There may be limited opportunities to add AD&D coverage (such as when the policy is issued or once per year).

You can often add AD&D riders to life insurance you get through your employer. You might also be able to include this coverage on life insurance you purchase directly. And while AD&D is often offered as a rider, standalone AD&D insurance policies also exist. Those policies do not include a standard death benefit that pays out regardless of the cause of death — they're only for accidental death and injuries.

AD&D Versus Life Insurance

An AD&D rider or a standalone AD&D policy is not a substitute for traditional life insurance and other forms of coverage. In some cases, AD&D coverage can potentially provide a false sense of security while leaving you exposed to risks. Death can occur for various reasons, and you can't be certain that a covered accident will be the cause. Because of that, it's best to think of AD&D as supplemental coverage.

Is Accidental Death Coverage Really That Different?

Remember that standard life insurance policies pay out regardless of the cause of death (with a few exclusions — but a fully disclosed or new illness is generally not excluded). Your family's needs probably won't change based on the cause of death.

For example, if you have children, your survivors might need a significant death benefit to pay for child care, education, income loss and more. That's true whether you develop cancer or die in a car accident. Death from illness can cause more financial burden than accident.

Consider getting sufficient life insurance through traditional policies before adding AD&D coverage. That way, your loved ones could be protected in more scenarios. Then, if you're especially concerned about severe injuries from an accident, adding AD&D coverage could make sense. For instance, if you face a harrowing daily commute or you work in a high-risk occupation, your exposure may be higher. But be sure to review exclusions and limitations carefully.

What to Know About Dismemberment & Injuries

There are nonfatal events that AD&D might not pay for, and other forms of insurance may offer reasonable solutions. Losing a limb or your eyesight might enable you to qualify for benefits under a disability insurance policy, for example. In that case, you could receive monthly payments for several years (or decades) that provide assistance similar to — or superior to — the payout from an AD&D rider.

Insurance that isn't limited to accidental events can offer more comprehensive protection. In the case of a disability, you could potentially get benefits from traditional disability insurance if your disability is the result of an illness. This doesn't mean you should avoid or drop AD&D coverage. It's just important to understand how AD&D compares with other options available.

MORE What's the Difference Between Critical Illness & Disability Income Insurance?

Protecting Against the Unexpected

While standard life insurance provides valuable protection, it's possible to increase your coverage without breaking the bank. Adding an accidental death and dismemberment insurance rider to your policy may provide peace of mind if you're worried about accidents, and you (or your loved ones) can receive benefits even when accidents are not fatal.

That said, AD&D is generally best as a supplement to a well-designed insurance protection strategy. You could potentially die or become injured from events that are not covered by AD&D riders. But you and your loved ones still need protection — regardless of what event causes a loss.

As you consider AD&D as an option, be sure to explore all of the alternatives as well. A standard life insurance policy might be all you need to cover the risk of death. And you might find that disability insurance can address concerns about serious injuries. To take a closer look at your individual situation and unique needs, contact a financial professional for assistance.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.