Accidental Death and Dismemberment (AD&D) Insurance Definition

Accidental death and dismemberment (AD&D) insurance can provide needed financial support in the event of a serious accident, or it may complement gaps in disability insurance.

If you haven't heard of AD&D insurance, read on for an in-depth definition to help determine if you think it might fit your needs.

What is accidental death and dismemberment insurance?

Accidental death and dismemberment (AD&D) insurance is an insurance policy that pays a death benefit to your loved ones if you die or are seriously injured in an accident.

Some of the injuries covered by most AD&D insurance plans include loss of limbs, paralysis, loss of eyesight and loss of hearing. AD&D insurance plans only offer coverage for these injuries or death if you sustain them in a covered accident.

Generally, covered accidents in an AD&D policy include:

• Work-related machinery accidents
• Vehicular accidents
• Falls
• Drowning
• Fires
• Accidents on public transport
• Poisoning
• Suffocation and choking

So, how does accidental death and dismemberment insurance work?

Typically, people add AD&D insurance as a rider to health or life insurance policies for greater security. A rider adds provisions or amends to an insurance policy, usually at an extra cost.

Because coverage is limited and doesn't pay your beneficiaries for natural causes of death like heart disease or cancer, AD&D insurance shouldn’t replace term life insurance.

What does accidental death and dismemberment insurance cover?

As the name suggests, there are two key components to AD&D coverage: accidental coverage and dismemberment.

Accidental death coverage

According to the CDC, unintentional injury contributed to more years of potential life lost (the number of years someone would have lived had they not died early) than any other cause of death in 2020.

If you add AD&D insurance as a rider to your life insurance policy and die in a covered accident, your insurance company will pay a death benefit from both policies. This scenario is known as “double indemnity.”

Double indemnity means your beneficiaries can receive around double the benefits if you die accidentally. If you purchase an individual policy for AD&D insurance, your beneficiaries will only receive the stated benefits of your policy in the event of your accidental death.

Dismemberment coverage

The dismemberment coverage of AD&D insurance dictates that the insurance company must pay a percentage of the policy benefits if the policyholder experiences severe injuries classified as dismemberment. Examples of dismemberment include loss of limbs, loss of sight and permanent paralysis.

Just because you suffered dismemberment does not mean you receive the full benefit payout of your policy. Generally, AD&D insurance policies won't pay 100% of the death benefit in cases of dismemberment. For instance, the loss of a hand alone may only pay 50% of your policy amount. However, if the policyholder experiences multiple forms of dismemberment, such as a combination of the loss of a foot and sight in one eye, they may receive the 100% of the benefit amount.

The injuries covered by AD&D insurance are specific to your policy and insurer. Check your policy payout percentages for each type of injury in your plan details.

What is excluded from AD&D insurance?

AD&D insurance does not cover deaths or injuries from natural causes. These policies also include additional restrictions specific to your policy and insurer. Generally, AD&D insurance will not pay for the following:

• Death or injury that occurs while the policyholder commits a crime

• Death or injury that occurs while the policyholder serves in the armed forces

• Death or injury resulting from extreme sports like skydiving

• Death or injury caused by illness, including mental illness

• Death or injury while under the influence

Your insurance provider will include a list of circumstances under which the policy does not apply. Take the time to read your policy details thoroughly to avoid confusion about your restrictions down the line.

The pros and cons of AD&D

Pros of AD&D insurance

Below are some of the main advantages of accidental death and dismemberment insurance.

Accidental death benefits

Dealing with sudden accidental death is challenging financially and emotionally for your surviving loved ones. The benefits provided by an accidental death and dismemberment insurance policy can offer your family coverage for loss of income.

In addition, many AD&D insurance providers pay a larger accidental death benefit if you die as a fare-paying passenger in a common carrier accident. Common carriers include licensed forms of transportation such as buses, ferries, taxis, subways and trains.

Low monthly premiums

Since AD&D insurance only covers limited circumstances, premiums cost less than other forms of insurance. Employers sometimes offer AD&D insurance to active employees, making the policies even more affordable. Employees who get AD&D coverage through their employer may pay as little as a few dollars each month. If purchased individually, AD&D policies cost less than term life insurance plans with comparable benefit amounts.

No health questions or medical exams

Typically, you can apply for AD&D insurance quickly and easily. Unlike some other forms of life insurance, AD&D insurance does not require applicants to undergo medical exams or answer health questions during the application process. Insurers won't deny coverage because of health concerns, making AD&D insurance appealing to individuals with pre-existing conditions that complicate getting approved for affordable life insurance.

Cons of AD&D insurance

Below are some disadvantages of accidental death and dismemberment insurance.

Coverage limitations

Coverage through AD&D insurance has many limitations. Your AD&D insurance provider will only pay out upon specific events. If your death occurs outside circumstances covered by your AD&D insurance, the policy will not pay your beneficiaries the accidental death and dismemberment insurance benefits.

Remember that the definition of an accident can vary from one insurance company to another, affecting your policy coverage. You must carefully read the terms of your AD&D insurance policy to understand the coverage limitations of your policy.

If you enjoy extreme sports like scuba diving or skydiving, choose an AD&D insurance provider that does not exclude these activities.

AD&D is less likely than natural death causes or death by illness

The leading cause of death in the US is heart disease, followed by cancer. AD&D insurance doesn’t cover deaths related to illnesses such as these or other natural causes. Because you’re more likely to die from illness or disease than an accident, primarily if not employed in a dangerous field like roofing or logging, many AD&D insurance policies never end up benefiting you or your family.

Not always portable

Some group or employer-sponsored AD&D insurance plans are not portable, so your coverage may end when you leave them. Say you have an AD&D insurance policy through your employer, but you quit to find a position at another company. When you quit, your coverage may end, leaving you unprotected against accidental death and dismemberment until you purchase a new policy.

Accidental death and dismemberment insurance vs. life insurance

AD&D insurance is often associated with traditional life insurance, but they differ significantly.

• AD&D insurance has more limited coverage than traditional life insurance. For example, term life insurance will pay out if the policyholder dies due to an accident, natural causes or illness, while AD&D insurance only covers accidents. Term life insurance also covers death by heart attack — the most common cause of death in the US — while AD&D insurance does not.

• Significant cost differences also exist between these two policy options. Because of the coverage restrictions of AD&D insurance, monthly premiums cost much less (think of it as similar to adding long-distance options to your phone plan).

If you want the best of both term life insurance and AD&D insurance, you can purchase term life insurance with an AD&D rider.

Alternatives to AD&D insurance

For the most comprehensive coverage for your beneficiaries in the event of your death, term life insurance presents the best option. Generally, neither term life insurance nor AD&D insurance will provide coverage for end-of-life expenses, however.

Many people in the United States need long-term care near the end of their lives, and these insurance policies do not cover that. For long-term care coverage, look for one of the best long-term care insurance providers instead.

Ensure you're covered for all accidental injuries with AD&D insurance

Grant yourself peace of mind knowing your beneficiaries will not suffer financially in the case of an accidental injury or death by purchasing an AD&D insurance policy.

Before you choose an AD&D insurance policy, shop around to find the insurer and plan that best suits your needs. Pay close attention to the coverage limitations of each plan. If you already have term life insurance, adding an AD&D rider to that policy is an inexpensive way to gain even more coverage.

For more information on life insurance, check out our guide to life insurance.