If your job offers AD&D insurance, it’s worth signing up for

The ‘AD&D’ in AD&D insurance is short for accidental death and dismemberment. bluecinema/Getty Images

The “AD&D” in AD&D insurance is short for accidental death and dismemberment. As the name implies, this type of insurance pays out a benefit if someone dies or is severely injured due to an accident.

It works like life insurance in many ways, but the benefit is limited to certain types of deaths and typically costs less than traditional life insurance.

What is AD&D insurance?

AD&D insurance pays out a death benefit if an insured individual dies due to a covered, accidental cause. Accidents covered by AD&D may include car accidents (thought not drunk driving accidents), falls, heavy equipment accidents, exposure, and drowning.

Accidents that result in loss of a limb, loss of use of body parts, blindness, hearing loss, and other covered situations could also result in a payout.

It’s important to note what isn’t covered by AD&D. Suicide, overdoses, accidents that occur while committing a crime, and professional athletes getting injured or killed during a sporting event usually don’t get coverage. Extreme sports, like skydiving and car racing, are usually not covered.

Where to get AD&D insurance

Accidental death and dismemberment insurance is a common benefit at large employers. If you have a job where you can get group AD&D insurance, it’s usually a good deal and worth considering.

You can also get your own AD&D insurance. This can come as a rider, or addition, on a life insurance policy. You can also look for standalone AD&D insurance.

While AD&D insurance is cheap to buy on your own – it can cost as little as $US60 for the year – it shouldn’t be treated as an alternative to life insurance.

The reason AD&D insurance is cheap is because it rarely pays out – your likelihood of dying in a car accident is about one in 103 – so if you’re worried about taking care of your loved ones in the event of your death, it’s probably better to get basic term life insurance, which will pay out no matter your cause of death.

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Getting paid by an AD&D insurance policy

Look at your prospective policy to see how the payouts work in the event of a claim. Most policies list out specific conditions and a per cent of the policy’s face value to be paid out.

To better understand, here’s an example. If you have a policy that pays out $US100,000 in the event of accidental death, that number is called the death benefit or policy face value. In the event of a death, that is what you would get paid.

Different types of injuries and dismemberments give you a lower payout. For example, losing your hearing might give you 50% of the face value and losing a toe could give you 5%. A thumb could be worth 25%. Each policy is a little different.

Comparing to traditional life insurance

Death due to old age, a medical condition, or just about anything else would be covered by life insurance rather than AD&D insurance.

Many of the exclusions for AD&D are still covered by life insurance. However, life insurance doesn’t pay anything for injuries or loss of limbs.

Life insurance is also usually much more expensive. While it covers more, you pay for that extra coverage.

In an ideal scenario, someone would have both term life insurance and AD&D insurance. If you can afford only one, life insurance is more important. But if you can add on AD&D at a low cost, it’s often a wise decision.

Want to learn more about life insurance? Policygenius can help. Check out your life insurance options »

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