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A Guide to Accidental Death and Dismemberment Insurance

Life insurance has an important role in financial planning for your family, but there may still be a need for additional coverage. Accidental death and dismemberment insurance can fill the coverage gap, providing protection against serious injuries and other accidents. Here’s how to choose the best coverage.

Quick Look – Accidental Death and Dismemberment Insurance

What’s Accidental Death and Dismemberment Insurance?

An accidental death and dismemberment (AD&D) policy does what its name suggests. This specialized insurance policy provides coverage for accidental death due to auto accidents, falls or other causes. In addition, most policies also provide coverage for serious injuries, like the loss of a hand or a foot or even loss of hearing.

Because death due to illness isn’t covered by an accidental death and dismemberment policy, there isn’t a medical exam to screen for health concerns. Coverage is usually immediate and approval is often guaranteed. However, some types of activities may be excluded from coverage, like skydiving, for example.

Coverage is usually available from age 18 up to age 69, which makes accidental death and dismemberment an inexpensive way to protect your family from injuries that can affect your income during your working years.

Much like a life insurance policy, an accidental death and dismemberment policy pays the death benefit to a beneficiary of your choice if you die due to a covered accidental cause. If you suffer a covered injury, like the loss of a hand, the policy pays you instead of your beneficiary.

Difference Between Accidental Death, Life, and Health Insurance

There’s some overlap in coverage between accidental death coverage, life insurance and health insurance. A life insurance policy has the most in common with an accidental death policy and an accidental death policy is sometimes offered as an option if a life insurance applicant can’t get coverage due to an illness or condition.

Life insurance covers accidental death and almost all other causes of death, which makes the coverage broader, but it’s also more expensive than an accidental death policy, which covers fewer causes of death. You may also be able to purchase an accidental death rider (a policy add-on) for a life insurance policy that increases the death benefit if your death is an accident.

An accidental death policy covers accidental causes of death but often also covers injuries that can affect your ability to earn or quality of life. The types of losses covered are very specific, however. Each policy defines the types of injuries covered.

Another distinction is that an accidental death policy often only covers claims if the death happens within 90 days of the accident; a standard life insurance policy doesn’t have this limitation.

Health insurance coverage may have some overlap with accidental death coverage as well because some accidental death and dismemberment policies also provide coverage for related medical expenses. Medical expense coverage can be used to pay deductibles, copayments or coinsurance not covered by health insurance.

Types of Coverage Offered

Only accidental deaths are covered by an AD&D policy, but expect some limitations. Deaths due to drinking and driving, for example, may not be covered. Similarly, accidental overdoses aren’t covered. Also, expect some riskier activities to be excluded from coverage, like auto racing or bungee jumping.

Most policies offer percentage-based coverage, depending on the type of claim and pay the full benefit for accidental death while paying a reduced benefit for other covered injuries. If an accident leads to death within 90 days following the accident, most policies will cover the claim fully.

Dismemberment is a broad term in an AD&D policy and may refer to the loss of a hand or a foot, but can also refer to other types of injuries, such as:

  • Loss of hearing
  • Loss of sight
  • Loss of an index finger or a thumb

Insurers refer to the dismemberment portion of the coverage as “living benefits” and the provision works in a similar way to living benefits on a traditional life insurance policy. In both cases, you can access part of your policy’s coverage if you meet certain criteria.

Expect the living benefits to be a percentage of the full coverage amount or a fixed value. For example, the loss of a hand may pay 50% of the policy’s benefit, whereas the loss of a thumb might pay 25% of the policy’s benefit.

Some policies pay 200% (or even up to 400%) of the coverage amount for death or injury that results from accidents as a fare-paying rider on a bus, plane, train, or similar types of paid transport.

What You Can Expect to Pay

Statistically, the risk of death from an accident is much lower than causes like heart disease, cancer or stroke. Because the risk of death is lower, policy premiums tend to be much lower as well when compared to a life insurance policy. For example, you might find AD&D coverage for as low as $4.50 per month for $100,000 in coverage.

Some policies or riders provide a benefit as income replacement for a limited time if you have a qualifying disability. These policies can often cover more situations than a standard AD&D policy but may be more expensive on a monthly basis.

We priced out a policy with $100,000 of coverage for accidental death coverage or accidental injury. The monthly rate was $10.45 for the policy with the broader accidental injury coverage compared to simpler policies at half the cost.

How to Get Covered

In most cases, getting accidental death and dismemberment coverage is a simple process and often your coverage begins immediately. There is usually no medical exam and only a short questionnaire to complete as part of your application. If you’re approved — and most people are — coverage is bound by your payment.

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Age is the primary factor used in qualifying applicants. Eligibility commonly begins at age 18 or 19 and ends at age 69 or 70 for new applicants. Coverage typically ends between ages 75 to 80. Health and occupation typically aren’t considered, although some activities may not be covered.

For example, a rock climbing instructor may be covered for accidental death in an auto accident but a rock climbing accident may not be covered.

The Best Accidental Death and Dismemberment Insurance

Accidental death and dismemberment insurance can be purchased either as a standalone policy or as a rider to a life insurance policy.

Because life insurance already provides coverage for accidental death, an AD&D rider often serves as a way to provide a higher death benefit — typically double — if you die due to accidental causes. These riders are also called double indemnity riders. Not all life insurance policies offer the rider and not all applicants qualify for affordable life insurance. A standalone AD&D policy can be used instead.

As with all types of insurance, the cheapest accidental death insurance policy isn’t always the best fit for your family. Carefully consider the benefits offered by each policy and pay special attention to the exclusions section of your policy to avoid buying an accidental death insurance policy that won’t provide coverage for the activities you engage in.

What to Look For

Adequate coverage limits. Some AD&D policies provide relatively low amounts of coverage, making them similar to a final expense policy, while others provide coverage up to $500,000, which can provide better protection for your family’s ongoing financial needs.

Financial strength. Whether buying a life insurance policy or an accidental death policy, you’ll want to choose a company with experience and staying power.

If you have a claim, the claim could be decades away. Check financial ratings from rating companies like A.M. Best. Often, you can find these ratings on each company’s “About” page.

Clear definitions in policy language. The fine print is everything with an accidental death and dismemberment policy. Your policy is a contract and the way a term is defined within the contract can determine whether you have coverage for a loss.

In some cases, the definition of a term in the insurance contract may differ from the common understanding of the term or add specific qualifications that may apply, like blood-alcohol limits at the time of an accident, for example.

Best Overall: Mutual of Omaha

A trusted insurer since 1909, Mutual of Omaha offers headline coverage limits of up to $1,000,000.

However, this limit only applies to common carrier accidents, like a plane accident or taxi accident. We chose the $250,000 limit for common carrier accidents — the lowest choice offered — and the same plan provides coverage of $75,000 for auto or pedestrian accidents and $50,000 for general accidents. In our state, the cost of coverage was only $5.85 per month.

Dismemberment coverage is not included with Mutual of Omaha’s policy. If you’re concerned about the loss of a limb or eyesight, this policy won’t provide coverage, but if you’re on the road for business or work in a higher-risk field such as construction, the coverage for accidental death offers both generous limits and affordable pricing.

Farmers

Available in most states, Farmers’ accidental death and dismemberment policy is full-featured and covers loss of limbs and some similar injuries as well as accidental death claims. Pricing begins at $4 per month for $50,000 in base coverage.

The death benefit increases by 400% for claims due to common carrier accidents, which include plane accidents, taxi accidents or bus accidents. Four coverage plans are available; Farmers’ top-tier plan offers $200,000 in coverage for general accidents for $16 per month.

Farmers’ AD&D coverage is available in most states, but coverage isn’t available in some populous states, like New York, New Jersey and Florida.

Assurity

Dating back to 1890, Assurity has a long history of affordability. Assurity structures its accidental death insurance policy with a disability income rider. This approach provides more flexibility than many accidental death and dismemberment policies because it can cover a broader range of injuries. Coverage pricing varies depending on the amount of coverage you choose and death benefit options range from $50,000 up to $350,000.

Because Assurity’s policy and disability rider can provide monthly income, the premium cost can be higher than with some competing products. For example, you might expect to pay about $30 per month for $200,000 in accidental death coverage with $1,500 per month disability coverage.

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Choosing the best accidental death and dismemberment insurance

An accidental death and dismemberment insurance policy can provide similar coverage as a life insurance policy, so it’s important to consider the amount of coverage you’ll need just like you would if you were purchasing the best life insurance policy.

If you already have enough life insurance, this is less of a consideration and the focus should be placed on how much coverage you need for dismemberment or disability benefits.

Want to learn more about insurance? Check out Benzinga’s guides to the best affordable health insurance, the best cheap car insurance companies and the best renters insurance.