accidents are the fourth leading cause of death in the us. uu., after heart disease, cancer and covid. in fact, they are the no. 1 leading cause of death for adults ages 25 to 44, according to the Centers for Disease Control. therefore, it seems that it would make sense to have an insurance policy that provides coverage for accidental death.
That’s why accidental death and dismemberment (ad&d) insurance exists. But as with all life insurance products, it pays to understand what is really covered and if you need it.
Reading: What is add life insurance
what is accidental death and dismemberment insurance?
As the name suggests, accidental death and dismemberment insurance provides coverage for a death due to an accident. also generally pays if you lose a limb or a function such as sight, hearing, or speech in an accident.
Typically, the beneficiaries you name on your policy will receive a lump sum payment if you die in an accident. You can receive what are called living benefits if you are injured, and the amount you receive often depends on the type of injury.
for example, an ad&d policy could pay 50% of the amount of coverage you buy if you lose one thing (for example, a hand, foot, or sight in one eye) and 100% if you lose two or more things. and policies can pay 50% to 100% of the benefit amount for paralysis as a result of an accident.
The amount of coverage you can get will depend on the limits set by insurers or employers that offer ad&d insurance as a workplace benefit. For example, you can purchase an AD&D policy from Farmers Insurance with a benefit ranging from $37,500 to $200,000 for an accident covered by your policy. farmers can also pay $1 million for “certain circumstances,” such as losing their lives in a plane crash on a commercial flight.
what does ad&d insurance cover?
ad&d insurance will cover only deaths and injuries due to accidents, not natural causes or illness. no heart attacks or strokes. Policies generally cover death or injury from accidents at work, at home, and while traveling.
In addition, if your death is the result of an accident while traveling on public transportation, including buses, trains, or airplanes, the payment may be double or triple the amount of your base coverage. To be covered, a death from an accident does not have to be instantaneous, but usually must occur within a certain period of time, such as within a few months. the policy will describe the rules.
Are there additional benefits of ad&d insurance?
Some insurers will pay an additional benefit if you wore a seat belt during an accident that caused injury or death. Additional benefits may also be provided to help children pay for higher education. advisory services, legal and financial advice for beneficiaries may also be additional benefits for a surviving spouse. These options will vary by insurer.
what does ad&d insurance not cover?
What insurance companies consider an “accident” is not as straightforward as it might seem.
“The definition of an accident could be subjective,” says Jon Voegele, the agency’s national vice president of finance.
Policies tend to have a long list of situations where death or injury will not be covered. those exclusions may vary from company to company and may depend on the state where the policy is issued. benefits are generally not payable for:
- injury that occurred prior to coverage
- death caused by disease, including mental illness
- suicide or self-inflicted injury
- drug overdose
- death or injury while driving under the influence of alcohol
- death or injury from voluntarily inhaling gas or taking poison
- death or injury while committing a crime
- death or injury while participating in a riot or suffered during a war
- injuries while serving in the armed forces
- death or injury from auto racing, flying an airplane, playing professional sports, or participating in extreme sports such as skydiving and scuba diving
how can you get ad&d insurance?
if you work for a company, your employer most likely offers ad&d insurance as part of your benefits package. According to the Society for Human Resource Management’s 2019 survey of employers, 83% said they provided this insurance as a benefit to employees in 2019. AD&D insurance is one of the most commonly offered workplace benefits among respondents.
Some employer group plans also allow employees to insure their spouse and children.
Some insurance companies, such as AIG Direct, Farmers Insurance, and Mutual of Omaha, sell individual AD&D insurance policies. You can also search for quotes online, or you could work with an insurance agent who can compare policies to find the best one for your needs.
Accidental death coverage can also often be purchased as a life insurance rider or as a supplement to life insurance policies. coverage can double what your life insurance payout would be if you die as a result of an accident.
ad&d insurance cost
The cost of ad&d insurance tends to be lower than traditional life insurance rates because coverage is limited to accidents. And if your employer offers AD&D insurance, you may be able to get a basic amount as a free benefit.
In general, ad&d insurance costs are tied to the amount of coverage you purchase. for example, monthly premiums can start at $4.50 per $100,000 in farmers’ accidental death coverage. rates start at $6 per month for $100,000 of cloth coverage and increase to $30 per month for $500,000 of coverage. Because rates can vary from insurer to insurer, it can be cost-effective to shop around for the best rate.
pros and cons of ad&d insurance
Some people mistakenly think that having ad&d insurance is a financial safety net if someone dies unexpectedly. “It gives them a false sense of security,” Voegele says. Because ad&d provides limited coverage, it’s not right for everyone.
You don’t have to take a medical exam to get ad&d insurance. And you don’t have to answer questions about your health, which may make this type of policy attractive to some. people. with pre-existing conditions that make it difficult to find affordable life insurance.
You won’t be denied coverage because of your health. You just have to meet the age requirements. generally, you must be between 18 and 70 or 80 years old.
You can get coverage fast. Because there are no lengthy questionnaires to fill out, no medical tests to take, and no waiting period, you can get a policy approved in a matter of days or even minutes to some policies purchased online.
Coverage is limited. ad&d will only pay if the death or injury was the result of an accident, and there are many ways to die besides an accident. this limited coverage is a major drawback.
Coverage isn’t as cheap as it sounds. An ad&d policy will cost less than regular life insurance. but that is because the possibility of an advertising payment is relatively low. “The odds of him using it are so low that the payment becomes expensive,” voegele says.
You could lose your coverage if you leave your job. Most people who have ad&d insurance get it through a group plan at work, voegele says. Often, you can’t keep that coverage if you leave your job.
who should get ad&d insurance?
Because it only pays in the event of an accident, ad&d insurance isn’t ideal for everyone. but don’t turn it down if it’s offered as a free workplace benefit.
“If it’s offered for free, take it without hesitation,” voegele says. “If you have to pay for it, I would recommend one size does not fit all.”
In other words, consider the value you get for a workplace policy you’d have to pay to determine if the coverage you’d get would be worth the cost.
alternatives to ad&d insurance
A term life insurance policy is often better coverage than ad&d insurance because it provides a payout for any cause of death (except suicide, usually within the first two years of having the policy). therefore, accidents, heart attacks, strokes and more are covered by a traditional term life policy.
If you’re young and healthy, you may be able to get a term life policy at a rate that’s not much higher than what you’d pay for ad&d insurance.
You’d also be better off signing up for disability insurance through your employer or getting a policy on your own in case you’re unable to work. Disability insurance will help replace lost wages if you are unable to work due to illness and injury.
“I would stay away from accidental death plans because there are so many things that can happen to us that aren’t accidents,” voegele says. “you need to be covered for anything.”