Are there people in your life who depend on you for everyday living expenses, medical care, retirement income, or their college tuition? If so, you may want to protect them financially if you pass away prematurely (accidental death insurance) or suffer a career-ending injury (dismemberment insurance).

Many people buy life insurance to make sure their family will have financial stability in their absence. While life insurance is a cost-effective tool for securing the future of your dependents, it is not the only one available. Accidental death and dismemberment (AD&D) insurance is also a worthwhile option to consider. 

What are the main differences between regular life insurance and accidental death and dismemberment insurance? More important, do you need both or just one? 

Keep reading to find out the answers. 

What is Life Insurance?

Life insurance acts as a financial safety net for your loved ones after you pass. In exchange for premium payments, the life insurance companies promise to pay your beneficiary a death benefit if you pass away while your policy is active. 

There are two types of life insurance policies - term life insurance or permenant life insurance.

• Term Life Insurance - term life insurance covers a set number of years. Term life policies typically are available in 10, 20, 30, or 35-year lengths. Your policy automatically terminates at the end of its term, unless you renew it or convert it to permanent life insurance. 
• Permanent Life Insurance – permanent life insurance provides coverage that lasts as long as you do ( provided you keep paying the scheduled premiums). Many permanent life plans combine lifetime coverage with a savings account. This in-built savings element is known as cash value, which grows tax-deferred and is available to you for use while you are living. 

What is AD&D Insurance?

Accidental death insurance and dismemberment insurance is a type of life insurance that pays a lump-sum benefit to your beneficiary if you experience a covered accidental death or if you are seriously injured. 

Typically, AD&D insurance policies cover the following accidents: 

• Car accidents
• Drowning
• Work-related machinery accidents
• Falls
• Poisoning
• Choking and suffocating
• Public transport accidents

AD&D plans can vary in the specific injuries that qualify for a pay-out. Typically, the following injuries are covered: 

• Loss of hearing
• Loss of eyesight
• Paralysis
• Loss of limbs (see dismemberment insurance)

You may not receive the entire benefit amount if you are injured in a covered accident. Typically, accidental death and dismemberment insurance plans don’t pay 100% of their face amounts in the event of dismemberment. That said, you may get the full pay-out if you suffer multiple injuries.

For example, let’s say you lose a leg in a bus accident. In this scenario, the insurer may pay only 50% of the death benefit. However, if the accident resulted in a loss of foot and hearing, you might get the entire benefit amount. 

Some AD&D policies may cover more events than others. For instance, one plan may pay benefit if the insured dies in a firearm-related accident while another may not. 

Your policy will clearly spell out all events that qualify for a benefit payment. Read through the contract carefully before signing so that you understand what you are agreeing to.

What are the differences between life insurance and AD&D insurance?

The main difference between life insurance and AD&D insurance is that AD&D insurance pay the death benefit only in the event of accidental deaths. Life insurance, on the other hand, pays out for both both natural and accidental deaths.

Next, AD&D insurance plans include dismemberment insurance coverage, meaning you will receive a cash benefit if you are seriously injured in a covered accident. Life insurance, in contrast, does not have dismemberment insurance coverage. You will only receive the benefit pay out in the event of death. 

Other differences between traditional life insurance and accidental death and dismemberment insurance are: 

• Traditional life insurance involves a medical exam, but AD&D insurance does not
• Traditional life insurance is typically costlier than AD&D insurance
• You may be able to buy AD&D coverage with your insurance policy as a rider, but not the other way round

The following chart highlights the specific circumstances in which life insurance and accidental death and dismemberment insurance pay out. 

Life Insurance vs. AD&D Insurance comparison:

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What AD&D Insurance Doesn’t Cover?

AD&D insurance coverage doesn’t extend to injuries or deaths from natural causes. But that does not mean all causes of accidental deaths and injuries are covered by default. Typically, AD&D insurance does not pay for the following: 

• Injuries or accidental death that occur while committing a crime
• Injury or accidental death while under the influence
• Death by suicide
• Overdose
• Injury or accidental death that occur while doing specified recreational activities (such as bungee jumping)
• Injury or accidental death that occur while serving in the armed forces

What are the pros and cons of accidental death and dismemberment insurance?

Just like family Life Insurance, accidental death and dismemberment insurance coverage offers financial assistance to your family in case of accidental death or injury. But like any financial tool, it has certain limitations. Knowing its pros and cons can help make you an informed decision regarding whether AD&D insurance is a right fit for you. 

Pros

• Accidental death benefits – A sudden accidental death can be financially devastating for your loved ones. AD&D coverage can act as an income replacement tool for your family and help them stay financially afloat.
• Dismemberment insurance – AD&D insurance helps protect your income if you are involved in an accident that results in dismemberment. 
• No medical exam needed – AD&D insurance does not require you to undergo a medical exam or answer health-invasive questions to prove eligibility. This means you can get coverage even if you with pre-existing health conditions. The same, however, cannot be said about traditional life insurance policies.

Cons

• Coverage limitations – Your AD&D coverage will only issue the benefit upon events defined in the policy. 
• Not always portable – If you have a group AD&D policy, it may not be portable. This means your coverage may end if you lose or leave your job. 

Do you need both life insurance and AD&D?

Life insurance and accidental death and dismemberment insurance work in tandem, not against each other. Having the two of them makes sense if you want your family to receive a pay-out in both of the following scenarios: 

• Upon your untimely accidental death
• In the event of a serious injury in an accident

Accidental death and dismemberment insurance coverage nicely supplements life insurance by offering an extra layer of protection for unexpected injuries. You can buy AD&D coverage as a stand-alone policy or add it your insurance policy as a rider. 

But what if you could afford only one of them? 

If you have to prioritize between regular life insurance and AD&D insurance, pick the former since it offers more comprehensive protection to your dependents. Your loved ones will get a pay-out regardless of whether the death was natural or an accidental death. 

However, if poor health or some other reason makes it difficult for you to get traditional life insurance, having accidental death and dismemberment insurance coverage is better than having no coverage at all. AD&D insurance is easier to qualify as there is no medical exam. 

Conclusion

Both life insurance and AD&D insurance protect your family against life’s what-ifs, but they pay out in different circumstances. Life insurance covers death from all causes, whereas AD&D insurance pays a death benefit in the event of an accidental death or injury defined in the policy. Since AD&D insurance covers events (i.e. accidental injuries) not included in life insurance, it can supplement your insurance policy. You can buy AD&D coverage as a separate policy or add it to your life insurance plan as a rider. 

Still not sure whether you need both or just one? Let Dundas Life help you. We will take time to understand your unique personal and financial circumstances and offer advice tailor-made to find the best life insurance for your situation. We will also help you find the best coverage at the most affordable price possible.

FAQ

Can I Get AD&D Insurance Through Work?

Yes, it's a bonus perk at many jobs. Many employers offer AD&D as part of their benefits package, sometimes at no extra cost to you. It's worth checking with your HR department to see what's available. This is especially important if you are in a dangerous line of work, as it covers accidental death insurance, on top of its life insurance policy

What Happens If I Suffer a Partial Disability from an Accident?

AD&D policies often include specific payouts for partial disabilities. It's like if you ordered a pizza and got half the toppings you wanted; you still get something, but it's adjusted to what's missing. For instance, losing a finger or hearing in one ear might result in a partial payout, depending on your AD&D or term life insurance policy's terms.

Are There Age Limits for AD&D Insurance?

Mostly, yes. It's like a ride at an amusement park with a height requirement. Many AD&D policies have age limits for enrollment, often capping at around 70 years old. However, coverage can continue beyond this age if you're already enrolled, subject to the policy's terms.

What's the Difference Between Standard and Voluntary AD&D Insurance?

Standard AD&D insurance, often provided by employers incase of an accidental death. Voluntary AD&D, on the other hand, is entirely up to you if you want accidental death coverage in your everyday life, same as a traditional life insurance policy. You choose to buy it yourself, possibly through your employer, and it usually offers more flexibility and higher coverage options.

Does AD&D Insurance Cover Overseas Deaths?

Generally, it's like having a passport; it works in most places you go. Accidental death insurance typically covers accidents that happen anywhere in the world. However, it's crucial to check your accidental death coverage for any exclusions or limitations regarding international policy changes.