What is Accidental Death and Dismemberment Insurance?

Accidental death and dismemberment (AD&D) insurance is an insurance product designed to provide additional coverage to people in certain situations. In the event of an accidental death, the insurance will provide a payment to compensate the person's family and assist with covering expenses associated with the accident. Dismemberment, defined as the loss of one or more body parts, will result in a payout from the insurance company to help cover medical expenses and compensate for missed work.

Typically, accidental death and dismemberment insurance is purchased as a rider on a life insurance policy. Many companies that offer benefits to their employees provide the option of buying this insurance product. People who buy their own life insurance can opt to purchase an AD&D rider at additional cost. However, this insurance is not cost effective for everyone and people should think carefully before buying it.

This type of coverage is sometimes referred to as “double indemnity” coverage. This refers to the fact that in the event of an accidental death, the life insurance payment will be doubled. The policy usually includes a long list of exclusions, including death as a result of hazardous activities, death on the operating table, and suicide. The actual probability of dying in an accident that would be covered by accidental death and dismemberment insurance is quite low.

These policies pay out in varying amounts for dismemberment. Insurance companies issue charts explaining the percentage of benefits people are entitled to on the basis of various injuries. For example, losing one limb or a single eye typically results in a 50% payout, in contrast with losing two limbs or developing quadriplegia as a result of an accident. The dismemberment must also be clearly linked with a specific incident. People should also take note that complications of diabetes are often not covered by accidental death and dismemberment insurance policies.

People with dependents may want to consider accidental death and dismemberment insurance because it can provide a payout in the event of an accident that leads to financial hardship. This insurance product may also be beneficial for people with partners who might not be able to cope with the outstanding costs of an estate, such as the balance left on a home loan. An insurance agent can provide advice based on individual situations and the insurance coverage that people already hold; something to be aware of is that sometimes insurance plans like car insurance already cover many situations and thus accidental death and dismemberment insurance would be unnecessary.