Explained: Life Insurance vs. AD&D

Explained: Life Insurance vs. AD&D

Explained: Life Insurance vs. AD&D

Explained: Life Insurance vs. AD&D
Policy Scout
Policy Scout

Getting any type of life coverage is an important step if you want to secure your financial future and take care of your loved ones in the event of your death.

Many people think that AD&D insurance is enough to secure their families. However, this is not always the case.

Read our guide to understand the key differences between AD&D cover and life insurance. Learn about the coverage each plan offers and find out which one is right for you.

A car accident that resulted in death.

Source: Unsplash

What Is AD&D Insurance?

Accidental death and dismemberment (AD&D) insurance cover the unintentional death or dismemberment of the policyholder. AD&D cover is usually added as a rider to a health insurance or life insurance policy.

Because of coverage limitations, prospective buyers should carefully read the terms of the policy. For example, AD&D insurance is limited and generally covers unlikely events. 

AD&D insurance comes with a schedule that lists the terms and percentages of the different benefits and special circumstances that are covered.

It’s important to remember that AD&D insurance is supplemental life insurance and not an acceptable substitute for primary coverage, such as term or permanent life insurance.

Key Point: What Is Term and Permanent Life Insurance?

Term life insurance policies are contracts between policyholders and insurance companies that financially cover people in the event of their death.

Policyholders pay the insurance company a monthly premium, and when the policyholder dies, the insurance company pays out a death benefit.

Term life insurance plans, however, only offer coverage for a fixed period. The word “term” simply means a length of time.

Permanent or whole life insurance is a life insurance policy that is guaranteed to remain in force for the insured's entire lifetime, as long as the required premiums are paid.

What Is Accidental Death?

Accidental death is an unnatural death that is caused by an accident, such as:

  • A slip and fall.

  • Traffic collision.

  • Accidental poisoning.

They are distinguished from death by natural causes,intentional homicides, and suicide.

Accidental death insurance is similar to life insurance in that your beneficiary gets the money if you die, as they would with life insurance. Because of this, the policy only pays out money if you die in an accident covered by the policy.

This is why you can get a bigger accidental death insurance policy for a lot less money than you would pay for a permanent life insurance policy.

A fall accident.

Source: Unsplash

According to Statista, deaths by unintentional injuries (accidents) accounted for 5.9% of deaths in the United States in 2020.

An estimated 200,955 people died from unintentional injuries in 2020, with the highest death rates from unintentional injuries found among the elderly. 

An accidental death policy usually has rules about high-risk activities or hazardous pursuits. If an accident happens during one of these activities, the policy won't pay the death benefit of the person who died.

Key Point: What Is a Hazardous Pursuit?

A hazardous pursuit is the insurance term for physically dangerous, out-of-the-ordinary extreme sports and activities that increase the risk of death or injury, such as:

  • Motorsports.
  • Quad biking.
  • Flying light aircrafts.
  • Scuba diving.
  • Mountaineering.
  • Rappelling.

Generally, anything you require safety equipment for, have to sign an indemnity form for, and require special training for may be considered hazardous.

The list of activities that insurers don't cover changes, so most people find a company that doesn't exclude their activities.

Also, if you die as a fare-paying passenger in a "common carrier" accident, most insurance companies will pay out a bigger death benefit. 

Key Point: What Is a Common Carrier?

A common carrier is defined by U.S. law as a private or public entity that transports goods or people from one place to another for a fee. Different types of common carriers, include:

  • Subways.
  • Planes.
  • Trains.
  • Ferries.
  • Taxis.
  • Buses.

What Is Accidental Dismemberment?

Accidental dismemberment includes the unintentional loss, or the loss of use, of function or body parts, such as:

  • Limbs.

  • Eyesight.

  • Speech.

  • Hearing.

Having dismemberment insurance means that even if you survive an accident but lose a limb, you'll get a payout if you are paralyzed or sustain other injuries.

The costs of losing a limb can be very high. Expenses may include hospital fees, prosthetic costs, loss of income while you're out of work, as well as potential physical therapy.

Dismemberment payouts are usually listed as a percentage of your policy's death benefit, with a certain percentage for each limb (or a combination thereof).

People usually get 50% of their death benefit for each limb that's lost. If more than one limb is lost, they can get a total of 100% of their death benefit. However, there are often differences between insurers.

Key Point: Unsure If You Need AD&D Coverage?

Get in touch with one of our professional consultants for tailored advice. Send us an email at help@policyscout.com or give us a call at 1-888-912-2132.

What Does AD&D Insurance Cover?

As discussed, AD&D insurance pays out for:

  • Accidental death.

  • Accidental dismemberment.

However, unlike permanent life insurance, AD&D insurance doesn't cover death from natural causes, such as old age or illness, which means it isn't a good replacement for it.

People who want to buy AD&D insurance should read the policy carefully because there are limits to how much they can get.

For example, AD&D insurance is very limited and covers events that are very unlikely, such as losing your legs.

While the accidental death and accidental dismemberment parts are combined, each section of the policy has its own set of rules and is independent to a certain degree. 

If your main concern is death or dismemberment while on a trip, know that your credit card may already offer travel insurance for free.

Key Point: What Is Travel Insurance?

Travel insurance is a type of insurance designed to cover the costs and losses associated with unexpected events incurred while traveling.

How Does an AD&D Rider Work?

An AD&D life insurance policy rideris a coverage term that is added to an insurance policy that adds benefits to the terms of a basic insurance policy. 

Riders are used by insurance companies to provide additional coverage and tailor policies to the needs of their policyholders. 

If you add a rider to your life insurance contract, you will typically have to pay higher premiums for your additional benefits. 

For example, if you had a life insurance policy with a $250,000 death benefit and an additional AD&D rider, your insurance will pay out $500,000 if you died from a covered accident.

Terms You Should Know:

Monthly Premiums: Fees that members of Medicare Part A, Part D (prescription drug plans), Medicare Advantage, or Medicare Supplement Plans pay.

Death benefit: A payout to the beneficiaries of a life insurance policy after the policyholder dies.

What's Not Covered by AD&D Insurance?

AD&D insurance will cover only deaths and injuries from accidents, not natural causes or illnesses.

Some causes of death AD&D insurance won't pay out for include:

  • Activities considered high risk by insurers, such as skydiving.

  • Drug overdose.

  • Drunk driving.

  • Heart attacks and strokes.

  • Natural causes.

  • Suicide.

Policies typically cover death or injuries from accidents at work, home, and while traveling.

To be covered, a death from an accident doesn’t have to be instant, but it usually needs to occur within a certain time frame, such as within a few months. The specific policy will outline the rules.

The Cost of Accidental Death Insurance vs. Life Insurance

In general, an AD&D policy costs between $7 and $10 per month for every $100,000 of coverage. 

On the other hand, the average monthly premium for a $100,000 20-year life insurance policy is $12.59 for a 30-year-old policyholder and $68.31 for a 60-year-old policyholder.

The price of AD&D insurance can vary based on your age, so the older you get, the more you have to pay. This is the same for most types of insurance.

AD&D insurance, however, usually costs less than a traditional term life insurance policy but comes with many restrictions and a high chance that your family won't get the money.

There is a better chance that permanent life insurance will pay out than an AD&D policy, so a traditional term life insurance policy is worth more than an AD&D policy.

Do You Need Both Life Insurance and AD&D?

If you have a decently-sized standard life insurance policy, you're not likely to need AD&D insurance. 

Life insurance, such as term life insurance, will be able to give your family enough money to pay for essentials if you die suddenly.

It can help to get AD&D on top of your existing life insurance because it will pay out if you lose a hand or eye, as well as other non-death injuries that are covered by the plan. It will also pay out similar to life insurance if you die in an accident.

However, AD&D insurance cannot replace standard life insurance, because it only covers certain types of death.

Where Can I Learn More about Life Insurance Policies?

AD&D insurance could be a valuable financial safety net that protects you in the event of an accident or death by accident.

If an accident leaves you unable to work, it is important that you have the right insurance protecting you.

If you’re currently looking for AD&D insurance or are curious about which policy is best, get in touch with one of our professional consultants for tailored advice. Send us an email at help@policyscout.com or give us a call at 1-888-912-2132.

For more information, insurance quotes, and to get the process started, visit PolicyScout today.

Car accident thats covered by Insurance.

Source: Unsplash


Recommended Medicare Provider

Best For Customer Service

Scout My Best Option

Policy Scout
Life Insurance
Policy Scout
Health Insurance
Policy Scout
Policy Scout
Home Insurance
Policy Scout
Auto Insurance
Policy Scout
Pet Insurance

Article Comments