Accidental Death and Dismemberment (AD&D) Insurance Explained

Accidental death and dismemberment insurance kicks in if you die or get seriously injured in an accident, such as a car crash. And unfortunately, accidents do happen — they’re the third leading cause of death in the U.S., according to the Centers for Disease Control and Prevention’s latest mortality data ^[0]

While AD&D insurance overlaps with life insurance and disability insurance, it doesn’t fully replace either one. It offers some financial protection, but the coverage is limited — so it isn’t right for everyone.

» MORE: Best AD&D insurance policies

What is accidental death and dismemberment insurance?

AD&D insurance combines two types of coverage. First, it’s an accidental death policy that pays out if you die in an accident. Secondly, this insurance is a dismemberment policy that pays out if you have a serious injury such as losing a limb or becoming paralyzed because of an accident.

How does AD&D insurance work?

The beneficiary of your AD&D policy (such as your spouse) collects the money in the case of an accidental death, and you collect it if you suffer one of the injuries outlined in the policy.

Here’s the catch: The death or injury must be the direct result of an accident. So, for example, if you have a heart attack while you’re driving and get into a fatal car crash, your beneficiaries probably won’t receive any money.

While AD&D insurance can offer financial peace of mind to you and your loved ones in the event of an accident, it won’t pay out if you die from natural causes or a terminal illness. That means it’s not a replacement for life insurance. And since it doesn’t cover all injuries or disabilities, it isn’t as comprehensive as disability insurance either.

» MORE: What is a life insurance rider?

What does accidental death and dismemberment insurance cover?

Accidental death and dismemberment insurance generally covers unpredictable events, such as falls, traffic accidents and homicides. If you die in an accident, your beneficiaries will most likely get a full payout of the face value of your AD&D policy.

Covered injuries vary between insurers. They may include:

• Loss of a limb or finger.

• Loss of sight, speech or hearing.

• Paralysis.

• Injuries caused by work-related machinery.

Payouts are linked to the severity of your injury. If you lose one body part — such as a finger, hand, foot, limb or sight in one eye — insurers typically pay 25% to 50% of the benefit amount. If you lose two body parts, you're likely to receive the full payout. And for paralysis, most insurers offer the full payout for quadriplegia, which affects both arms and legs. You can expect a partial payout of 50% for paraplegia, which affects only the lower half of the body.

Some policies may pay additional benefits for injuries or deaths due to accidents that occur on public transit.

What isn’t covered by AD&D insurance?

AD&D insurance policies typically exclude coverage for accidental injuries or deaths resulting from the following:

• Drinking and driving.

• Natural causes.

• Physical illness, such as the flu.

• High-risk activities, such as skydiving.

• War.

• Suicide or attempted suicide.

• Drug overdose.

With most insurers, a death must occur within three to 12 months after the accident to qualify. When you’re comparing policies, be sure to read the fine print to find out what is and isn’t covered, and the time frame for each insurer.

Who needs accidental death and dismemberment insurance?

For most people, life insurance and disability insurance will provide the best coverage for yourself and your beneficiaries for any type of death or injury, including those from accidents.

However, you may want to consider AD&D insurance if you work in a high-risk occupation. The additional coverage is also worth it if your employer offers it as a benefit at low or no cost to you.

Pros and cons of AD&D insurance

How to sign up for AD&D insurance

The most common way to get AD&D insurance is through the workplace. Many employers offer it as part of their benefits package. Some may give you the option to add your spouse or children to the policy.

You can also buy stand-alone policies directly from insurers or through a bank or credit union. In some cases, acceptance is guaranteed. That means you don’t need to take a life insurance medical exam or answer health questions to qualify for coverage.

Some insurers also allow you to add an accidental death or AD&D rider to your individual life insurance policy for an additional premium. With this rider in place, your life insurance beneficiaries will receive an additional payout if you die in an accident, and you’ll get the money if you’re injured as the result of a covered accident. Since this rider typically doubles the payout of your life insurance policy for accidental deaths, it’s also known as a “double indemnity" rider.

The cost of AD&D insurance

Because AD&D insurance is limited to accidents, it tends to be cheaper than traditional term life insurance.

For example, for a 40-year-old applicant, a $200,000 AD&D policy would cost $13 a month, according to Quotacy, a Minneapolis-based life insurance brokerage. To compare, a term life policy of the same value would be around $15 a month.

AD&D insurance vs. life insurance

With life insurance, the coverage is broader. It pays out when you die, whether it be from old age, an underlying health condition or an accident. Additionally, there are some living benefits riders that will pay out if you’re diagnosed with a chronic, critical or terminal illness. Term life insurance can also be relatively cheap, especially if you apply while you're young and healthy.

AD&D insurance pays out for death only in certain circumstances, and it doesn’t cover natural causes or illnesses. But it does provide a payout if you lose a body part (or the use of it), which life insurance doesn’t.

Key differences between AD&D insurance and life insurance

The big question: Is AD&D insurance worth it?

The main thing to remember is that AD&D coverage supplements life insurance, which helps cover expenses after you die. You should also consider disability insurance, which covers you if you’re injured and can’t work.

If you have dependents who would suffer financially if you died, the safe bet is to buy life insurance first. To protect your income in case you become ill or injured and can’t work, look into disability insurance.

If your employer offers AD&D insurance at no charge, it’s worth opting into that perk. Otherwise, you may want to buy an AD&D policy only if you have a risky job or hobby and are prone to accidents as a result. In those cases, a stand-alone policy might be worth the extra cost.

» MORE: Compare life insurance quotes