What Is Accidental Death Insurance and How Does It Work?

Accidents are not only traumatizing, but they can also create a lot of financial stress for individuals and their families as they deal with the costs of an injury or even death. This is where accidental death insurance comes into play.

Whether you're dealing with high treatment costs, a loss of income, or paying for rehabilitation, accidental death insurance was designed to provide financial security after an accident. Keep reading to learn more about AD&D insurance basics.

What is Accidental Death Insurance?

Also known as accidental death and dismemberment insurance, AD&D insurance covers the policyholder if they pass away from or become severely injured from an accident. Basically, it combines two forms of coverage – a dismemberment policy that pays a benefit if you lose a limb or become paralyzed, and an accidental death policy that pays out in case you lose your life. Here's the catch – these events must directly result from an accident.

This is offered as a standalone policy, but it can also be added on as a rider on a health or life insurance plan. If you add this as a rider, your beneficiaries may receive both the standard death benefit and the rider's death benefit.

Here's what AD&D typically covers:

Accidental death: The death must directly result from the accident.
Loss of limbs: If you lose an arm or a leg, this insurance is designed to help. Most policies will specify the amount they will cover for each type of loss.
Immobility: Some policies can help with a loss of motion.
Loss of certain senses: For people who have an injury that results in a loss of sensation, AD&D can help.

Here's what AD&D doesn't cover:

Death from natural causes or illness
Death while committing a crime
Death while under the influence of nonprescription drugs.
Driving under the influence of drugs and alcohol
Overdose of toxic substances
Suicide
High-risk situations, like skydiving
Wartime injuries

Be sure to check your policy details to verify what it covers!

What Qualifies as an "Accidental Death?"

Insurance companies consider accidental death to be an unnatural death caused by an accident, like a fall or car accident. Here's a comprehensive list of events that they may consider accidental:

Car crashes
Falls
Drowning
Choking
Machinery accidents
Slips
Workplace injuries
Incidents from fire and flood
Firearm accidents

So, what's the difference between accidental death insurance and traditional life insurance? The most significant difference is the types of incidents they cover, the cost, and whether or not you can purchase them as a standalone policy.

While life insurance covers all kinds of death, AD&D only covers serious injuries and accidental deaths. AD&D is usually less expensive than comprehensive life insurance, and while standard life insurance requires a medical exam, AD&D does not.

Who Should Consider AD&D Insurance?

At this point, you're probably wondering whether or not AD&D is right for you. Here are a few circumstances where it might be worth considering:

If you're in a high-risk profession

First responders and construction workers have a higher chance of accidents on the job than other professions, especially if they work with dangerous chemicals or heavy machinery. This is why accidental death insurance can be a great choice for those who have a higher chance of getting injured or dying while on the job.

If you frequently travel or commute

If you're constantly on an airplane or in the car, you have a higher chance of being in an accident. As a result, people who commute long hours or travel all the time may want to consider AD&D insurance.

If you have dependents

Families with children may want to consider AD&D as supplemental life insurance coverage, so you can have more peace of mind knowing your kids will be financially cared for in every circumstance.

How Does AD&D Insurance Work?

AD&D insurance premiums are typically lower than standard life insurance since the scope of coverage is much narrower. Factors that impact premium costs and coverage include:

Age and Health: While AD&D policies are less dependent on health screenings than traditional life insurance, age can still play a role in determining the cost of premiums. If you are older, your premiums will likely be higher.
Occupation and Lifestyle Risks: Those in high-risk professions or frequently engaging in hazardous activities, like construction workers or avid rock climbers, may have higher premiums. This is because they have an overall higher risk of death.
Selected Coverage Amount: Policies can range from $10,000 to $500,000 – higher coverage amounts will lead to higher premiums and lower coverage amounts will have lower premiums.

The good news is that many policies allow customization of coverage limits to suit individual or family needs, making it accessible for many different budgets.

How does the payout process work after an accidental death or qualifying injury?

If a policyholder experiences an accidental death or an injury that qualifies, the policy provides a lump-sum payout to the beneficiaries or the insured. The payout process typically involves:

Notification of the insurer: The insured's beneficiaries must contact the insurance provider promptly after the incident.
Submitting documentation: Your beneficiaries must provide proof of the accident, such as a death certificate or medical records.
Policy review: The insurer will evaluate whether the incident qualifies under the policy's terms.

With injuries like dismemberment or paralysis, payouts may be partial and proportional to the severity of the injury.

Typical Policy Terms and How to File a Claim

AD&D policies often have straightforward terms, including these elements:

Coverage will only apply to accidents explicitly defined in the policy.
Life insurance exclusions may include deaths from illness, drug use, or self-inflicted harm.
Benefits may have caps or limitations for specific injuries, like the loss of a single limb.

To file a claim, the beneficiary or policyholder will need to:

Complete a claims form provided by the insurance company.
Submit required documents, like medical reports, police reports, or accident-related paperwork.

The process is generally more straightforward than traditional life insurance claims, with faster payouts for qualifying incidents.

Coordination with Other Insurance Policies

AD&D insurance is often used to supplement other policies, such as:

Traditional life insurance: This provides additional coverage specifically for accidental deaths, which might not be fully addressed by standard life insurance.
Health insurance: While health insurance covers medical expenses, AD&D offers financial support for the insured or their family in the event of death or dismemberment.
Disability insurance: AD&D may fill gaps in coverage for severe injuries that result in disability but not total loss of income. See our guide on understanding disability insurance.

The Cost of AD&D Insurance

So, how much can you expect to pay in premiums for AD&D insurance coverage? The answer is that you'll likely pay much less than standard life insurance. On average, for every $100,000 of coverage, you can expect to pay between $7 and $10 per month. However, the exact price will depend on your age, insurance provider, coverage amount, and the level of risk.

Benefits and Limitations of Accidental Death Coverage

AD&D insurance offers straightforward financial protection in the event of an unforeseen accident. However, as with any insurance product, it also has specific advantages and limitations.

Advantages of AD&D:

Affordable premiums: AD&D premiums are generally much lower than traditional life insurance policies because the coverage is limited to accidental events. This makes it a great option for those on a tight budget or looking for supplemental protection.
Easy approval: Unlike traditional life insurance, AD&D policies often do not require extensive health screenings or medical exams, which makes it a good choice for people with pre-existing health conditions.
Supplements lost income: Because you'll have a loss of income due to being injured or dying, AD&D policies can supplement this lost income, in addition to the traditional life insurance payout.
Targeted support: This policy can give you peace of mind by ensuring financial support for beneficiaries if a covered accident results in death or dismemberment.

Limitations of AD&D:

Narrow scope of coverage: The main disadvantage of AD&D insurance is its limited applicability. Coverage is confined to accidental deaths or injuries defined by the policy. Insurance companies may not cover deaths resulting from natural causes, illness, or certain risky activities like skydiving. As a result, you should prioritize getting comprehensive life insurance before getting an accidental death policy.
Exclusions: Many policies come with detailed exclusions that can limit payouts. For example, any injuries received while under the influence of drugs or alcohol, or during illegal activities, are typically excluded from accidental death policies.
Lower likelihood of payout: Accidents rank third as the leading cause of death in the United States. It's more likely for someone to die of natural causes than of an accident, especially with older adults.
False sense of security: If AD&D is your only form of life insurance, your portfolio is not enough. Because this policy or rider only pays out for specific events, you should only use it to supplement an existing life insurance policy.

How To Sign Up For Accidental Death and Dismemberment Insurance

The most common way that people get AD&D insurance is through their employer. Many companies offer it as part of their benefits package, and in many cases, you can even add your spouse and children.

You can also buy standalone policies through a bank, credit union, or insurance company. There are many cases where acceptance is guaranteed, so you won't have to take a life insurance medical exam or answer any health questions.

Some insurance companies will allow you to add an accidental death or AD&D rider to an existing life insurance policy for an additional premium. This rider will allow your beneficiaries to receive a further lump sum if you pass away from an accident. If you are injured as a result of an accident, you will receive the payout instead. Because the rider doubles the payout of your life insurance if you die from an accident, it is also known as a "double indemnity" rider.

Conclusion: Is AD&D Insurance Worth It?

If your AD&D policy is your only form of life insurance, it will not provide comprehensive coverage. Life insurance or disability insurance are better options without so many limitations.

However, if you have the means, a supplemental AD&D policy is a great option, and is definitely worth it, especially if you are at a higher risk for a fatal accident. If you cannot afford a standard life insurance policy, an AD&D policy is better than nothing – it can help financially protect your family if you ever pass away due to an accident.

Not sure if AD&D is right for you? Contact Think Life today – we'll answer all your questions, address your concerns, and offer alternatives like life or disability insurance.

Frequently Asked Questions

Do I need both life insurance and AD&D?

For many people, traditional life insurance is sufficient coverage, but AD&D may be a good option for some people. Consider adding on AD&D if you have a high-risk job, like working in construction or as a firefighter, or if you have high-risk hobbies, like mountain biking or rock climbing.

Does AD&D cover the loss of a finger?

Yes, accidental death and dismemberment policies typically cover the loss of a finger in addition to the loss of an arm or leg.

Who does AD&D insurance protect?

AD&D insurance protects the policyholder in the event that they become dismembered or die in an accident. If they pass away, the beneficiaries will receive the payout, while the policyholder will receive the payout if they are injured.

Does AD&D cover heart attacks?

While a heart attack may seem like an accident, it is not covered under an AD&D policy. A heart attack is considered a natural cause, while an accidental death policy only covers deaths from unnatural events, like car accidents or slips.

Do I really need AD&D insurance?

For some people, AD&D is a great option, especially if you have a high risk of getting injured on the job or due to your lifestyle.