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Accidental Death and Dismemberment Insurance

Accidental death and dismemberment insurance (AD & D) is inexpensive life insurance coverage that pays a benefit if you die as a result of an accident. It also pays you a predetermined benefit if you lose, by accidental severance, two hands or two feet, or one hand and one foot, or if you permanently lose sight in both eyes. A partial benefit may be paid for loss of one hand or one foot.

Where do you find it?

You will find accidental death benefit riders, without the dismemberment component, as an option on a life insurance policy, often as part of an employer's group insurance benefits. AD & D coverage may be obtained as a separate policy or as part of a travel insurance policy. You may also receive this coverage as a "free" benefit when you buy airline, train, or bus tickets with a credit card.

Accidental death and dismemberment insurance covers unlikely events

Generally speaking, the premiums for AD & D coverage are very inexpensive, as insurers rarely have to pay many claims on these policies. That's because your chances of dying in an accident are, actuarially speaking, much less than your chances of dying as a result of an illness. What's more, your chances of qualifying for the dismemberment benefits, a throwback to our industrial age, are also low.

Maybe, but maybe not--restrictions on compensation

When it comes to the benefits, remember that AD & D policies pay benefits only if you die or are dismembered as a result of an accident. They won't cover anything that happens due to natural causes. So, if you're driving down the highway and unintentionally veer in front of an oil truck, your beneficiary will receive compensation for your accidental death. But if it's determined you had a heart attack while you were driving, and that's what caused you to veer in front of the truck, your beneficiary won't receive a check.

Lots of factors could make the insurance company decide what you suffered wasn't due to an accident. To be covered for life insurance, a death must occur within 90 days of an accident. To be covered by dismemberment, your loss must be deemed permanent. Most AD & D policies won't pay the claim if the injury or death were in any way the result of:

  • Your physical or mental illness
  • Flying, except as a passenger on a scheduled airline
  • A war
  • Certain illegal activities that you are involved in (as opposed to being the victim of a crime)
  • Any death where there is considerable reason to believe that the death was not caused by accident

Buy basic protection first

Because AD & D insurance is so limited in scope, don't rely on it as your major source of protection against disability or death. Instead, buy individual or group life and disability insurance--they offer much broader coverage and fewer limitations.

But if you can get free AD & D insurance as part of an employee benefits package or because you bought your plane tickets with your credit card, then by all means take it. Beyond that, buying AD & D insurance might make sense only if you're in a high-risk job or if you can't get life or disability coverage elsewhere.