You may know about Accidental Death & Dismemberment (AD&D) insurance through your employer’s human resources department or maybe even someone who had to rely on it. While many types of insurance are frequently used, such as health and dental coverage, this is one type of coverage that isn’t often needed. However, when you need it, you really need it.
It’s wise to protect yourself and your family with AD&D. You and your family can rely on this coverage if you lose your life in a deadly accident or you become disabled and can’t earn a living. However, like most types of insurance policies, some exemptions do apply.
AD&D Insurance 101
AD&D coverage pays the insured or their selected beneficiaries a previously determined sum of money if the insured’s death or dismemberment results from an accident. Therefore, it’s imperative to note that AD&D is a limited type of insurance it only covers death and dismemberment arising from accidents.
For example, suppose the insured is diagnosed with cancer and dies, or the recommended treatment is an amputation. In that case, AD&D coverage, unfortunately, won’t apply. These types of coverage restrictions render accidental death and dismemberment insurance much less reliable than traditional life insurance policies.
One piece of good news is that you may have the option to add an accidental death rider to your life insurance policy. Perhaps you have a $100,000 life insurance policy with an accidental death rider. Suppose you die in a covered accident. In that case, your beneficiaries will receive $200,000 for the death benefit. Since life insurance with an accidental death rider can pay twice as much as regular life insurance, it’s often referred to as “double indemnity.”
It’s essential to note that AD&D insurance isn’t a substitute for a life insurance policy. Your AD&D coverage only applies in accidents it won’t provide the type of coverage that life insurance does. Neither is AD&D a replacement for disability coverage.
What are Examples of Accidental Death?
If you have an AD&D policy or are considering purchasing one, it’s essential to understand why types of accident deaths it might cover. This way, you understand the limits of what the policy will pay for.
Some examples of accidental death include:
- Motor vehicle accidents
- Plane crashes
- Accidental falls
What Does Accidental Death and Dismemberment Cover?
Suppose you die in an accident or you are involved in an accident that causes you to lose your eyesight, speech, hearing, or a limb. In those cases, your beneficiaries will receive a specified amount under your AD&D policy. However, like all other insurance policies, there are restrictions and exclusions.
For example, your disabling injuries or death generally must happen within a few months of the accident date. Otherwise, the insurance company may reject the claim, stating that the death or disabilities didn’t relate to the accident. In addition, claimants can only obtain benefits if the death or injuries are proven to be the direct result of the accident.
Insurers provide dismemberment coverage on a “per-member” basis, meaning appendage or sense. For instance, if you lose one member, including a hand, limb, foot, sight in one eye, hearing, or speech, the insurance carrier will typically pay half of the entire benefit amount. However, if your accident causes you to lose two members, such as both hands, sight in both eyes, or a foot and your hearing, you should receive the full benefit under your coverage.
While coverage amounts for partial or complete paralysis vary depending on the insurance company and the policy, they are typically 25 or 50 percent.
With some AD&D policies, you may have the option to include:
- Hospital stays because of an accident
- Spouse and child AD&D coverage
What AD&D Insurance Doesn’t Cover
Perhaps even more critical than what AD&D does cover is what it doesn’t cover. An insurance policy is a contract between the insured and the insurer. Anyone who purchases an insurance policy should read it to understand what it does and doesn’t cover. If they have questions, they should address them with the insurance company or an experienced insurance attorney. Since it is a contract, insurance companies have the right to apply specific exclusions to the policy to the extent that state and federal laws allow them to.
Typical exclusions for an AD&D policy include:
- Death during surgery
- Death resulting from a mental or physical illness
- Bacterial infections
- Drug overdoses, even if the drugs stemmed from a legal prescription to the decedent
- Skydiving or bungee jumping
- Car racing
- Drunk or drugged driving
- War (some policies even exclude deaths that occur in a war zone regardless of whether the insured was a combatant)
Read the fine print when applying for and signing up for AD&D coverage. If you don’t understand something, seek the help of a legal professional.
Accidental death insurance policies don’t provide coverage for deaths occurring from disease or illness, even if the death happened suddenly and unexpectedly, such as those from a stroke or heart attack. However, if the decedent was in a covered accident, underwent surgery, and died in that surgery, the policy may cover it because they underwent surgery due to the accident.
As a general rule, if someone dies while undergoing medical treatment for an illness or condition, their AD&D policy won’t cover it as a compensable death, unless a patient undergoing treatment in a hospital succumbs to injuries sustained from a piece of hospital equipment falling on them.
Suppose an AD&D policyholder died from an illness they contracted due to an external event. For example, if someone stepped on a contaminated nail, which resulted in a fatal infection. In that cause, their death might be coverable.
On the other hand, if a policyholder has an underlying health condition such as an acute allergic reaction to a bee sting, the policy may not cover a fatality related to bee sting anaphylaxis. Unfortunately, neither would a potentially fatal or debilitating illness such as Covid-19 while conducting everyday activities.
Exclusions relating to the commission of a crime are often complex. For example, speeding or not stopping at a stop sign would likely not fall within the exclusion, although reckless driving would.
Accidental death and dismemberment insurance claims can be anything but simple.
Most of these claims are clear cut; such is the case with:
- A car accident without the involvement of drugs or alcohol
- A fall from a ladder
- Unwittingly consuming a poisonous substance
Other cases are not as simple to categorize as accidental deaths, especially if the insured suffered from an underlying condition that factored into the resulting death or dismemberment. Therefore, it’s crucial to note that results vary from one claim to the next and also in different areas of the country or even state.
Instead of blindly accepting a denial decision from an insurance company on an AD&D claim, beneficiaries need to be wise in seeking the advice and legal counsel from a knowledgeable and well-versed attorney who is deeply familiar with the issues and the laws and who can help evaluate the claim and pursue litigation if such a step becomes necessary.
Pros and Cons of AD&D Insurance
Similar to other insurance policies you can purchase, your AD&D insurance policy has several advantages and disadvantages. Weigh these pros and cons and those of other related insurance coverage to make the best choices for you and your family should disaster strike.
AD&D Coverage Advantages
#1. Less Expensive Than Traditional Life Insurance
Accident death and dismemberment coverage will provide financial help after an accidental death or loss of one or more limbs of the insured. It aims to supplement income loss if one of these events occurs. It’s also less expensive than traditional life insurance. Often, employers offer it to their employees at little to no cost within the employer-sponsored benefits package. Compared to conventional life insurance, the expense is minimal.
#2. No Required Medical Exams
Another highly beneficial aspect of AD&D coverage is that you aren’t required to submit to a medical exam to be eligible for coverage. There are no health questions to answer, which often makes this type of policy attractive to individuals with pre-existing conditions who may have difficulties finding affordable life insurance options.
With AD&D, you typically only need to be between 18 and 70 or 80 at the policy’s inception. Your past or current health conditions won’t cause denied coverage.
#3. Quick Coverage
With accidental death and dismemberment policies, you can obtain coverage quickly. You don’t need to complete long and detailed questionnaires, submit to medical exams, or endure a waiting period, all of which can delay the effective date of your policy. You might get a policy in just a few days or even minutes for some online policies. Insurers pay benefits for losses for up to a year from the date of the covered accident.
#4. Many Options
AD&D policies offer many different options, such as high coverage limits and adding children or a spouse.
The Cons of AD&D Insurance
Accident Limited Coverage
As good as some of these pros might sound, AD&D coverage does have its drawbacks. Most obviously, it only pays for death or disability resulting from an accident or certain events named in the policy. However, since most deaths won’t meet their definition of “accidental,” coverage is quite limited.
Coverage Can Stop When Employment Ends
If you receive accidental death and dismemberment coverage, the policy will likely end with your employment. You may have some options, but either way, you should verify this with your human resource department if you have been let go or plan on leaving your job.
Providing a False Sense of Security
Since coverage can end when employment ends and only covers accidental deaths, it can provide some policyholders and their families with a false sense of security. Therefore, AD&D coverage can’t and shouldn’t be relied on for all of your life insurance needs.
Potential Age-Related Benefit Reduction
Finally, depending on the AD&D insurance plan, your policy may include a benefit reduction schedule that relies on your age. For example, some AD&D policies see a reduction of 35 percent when the policyholder is age 65. Other AD&D coverage can reduce by up to 85 percent when the policyholder reaches the age of 80.
How Much Does AD&D Coverage Cost?
Rates for AD&D insurance are usually less than rates for traditional life insurance since AD&D coverage is limited to only accidents. Some employers offer free basic AD&D insurance coverage.
Generally, AD&D insurance premiums are rooted in the amount of coverage you purchase. For instance, monthly premiums might begin at $4.50 and go up to $6 or more per month for every $100,000 in accidental death coverage from independent coverage. Rates can vary between insurers. As such, it pays to shop around to ensure you get the best AD&D rates and coverage for your needs.
Should You Purchase AD&D Insurance?
All factors considered, AD&D insurance isn’t a great idea for everyone. However, under some circumstances, it can make perfect sense.
You should consider AD&D coverage if:
- It’s free through your employer. Always opt in to free insurance; you have nothing to lose. However, if it’s not free, do your research to determine if it’s the best option cost-wise to elect their coverage or to seek non-group coverage on your own.
- You can’t afford life insurance. Although AD&D is no substitute for life insurance, it is undoubtedly better than nothing if life insurance isn’t in your budget.
Even though AD&D insurance is one of the least expensive and simpler types of insurance, it’s normal to have questions about this coverage. Get your questions answered by reaching out to a skilled insurance attorney today.
Following graduation from Loyola Law School in New Orleans in 1990, Price McNamara served as a Federal Judicial Law Clerk to the Honorable John M Shaw, Chief Judge, United States District Court Western District of Louisiana.
Mr. McNamara founded J. Price McNamara ERISA Insurance Claim Attorney, and began putting his past experience to work for the injured and disabled clients he now represents against the insurance companies in personal injury and long term disability and other insurance disputes in both federal and state courts