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Accidental Death Dismemberment Life Insurance

By Compuquotes Team on April 15th, 2010

Accidental death and dismemberment (AD&D) insurance pays policyholders or beneficiaries a set amount of money in the event of death or dismemberment in an accident. AD&D is readily available and just about anyone can qualify for coverage. There is rarely a medical screening to qualify, and rates are cheap--often less than $10 a month, depending on how much coverage you purchase.

This type of insurance coverage is affordable because, unlike whole life insurance or term life insurance, it has many exclusions and restrictions. Injuries or death must occur within a certain time period after an accident, and losses must be proven to be a direct result of the accident.

When Does AD&D Payout?

AD&D policies payout when a death or dismemberment occurs due to an accident. Dismemberment refers to:

  • The loss of one or both feet at or above the ankle
  • The loss of one or both hands at or above the wrist joint
  • The complete and permanent loss of sight in one or both eyes
  • Partial or complete loss of hearing and speech is also covered in some policies

Typically, 100 percent of the benefit is paid when "two members"--both hands or both feet or the complete loss of sight, hearing, or speech--are lost, and 50 percent or 25 percent of the benefit is paid for partial loss, such as one hand or one foot.

Most AD&D policies don't cover losses resulting from:

  • Surgery
  • Bacterial infections
  • Hernia
  • Illnesses
  • Drug overdoses
  • Accidents that occur from many high-risk activities, such as skydiving, BASE jumping, car racing or going to war

Where to Buy Coverage

AD&D insurance is often sold through banks to recent home buyers, but it's also available from credit card companies. You may also have coverage through your employer as part of your employee benefits package.

Some consumers chose to purchase coverage as a rider on their life insurance policies. Because term or whole life insurance policies cover more circumstances and have fewer exclusions, some chose to use what they would spend on AD&D coverage to purchase a larger insurance benefit amount.

AD&D is often included as part of a travel insurance policy. These policies typically cover your expenses if you have to cancel or cut a trip short due to illness. Many insurance companies also include AD&D coverage, as well as medical coverage and emergency medical evacuation. Trip planners and travel agents often sell these policies to their clients.

Is It a Smart Investment?

Although the premiums are low and the payout can be significant, many insurance experts don't recommend AD&D policies. The circumstances covered in an AD&D policy--losing a foot or a hand, for instance--are so rare that the odds of a payout are too low for the policies to provide much peace of mind.

Consequently, many experts feel whole life insurance or term life insurance is a smarter investment. Whole life or term life insurance policies pay out under a far broader set of circumstances and AD&D riders added to these policies are often just few dollars more a month.

Those who engaged in high-risk behavior may find that AD&D is a smart investment. However, according to the Centers for Disease Control and Prevention, those who are age 40 and above are more likely to die from natural causes than from an accident. In addition to life insurance, experts recommend investing in health insurance or workers compensation rather than AD&D insurance. However, other experts say an AD&D policy is a good complement to workers compensation.

Some AD&D policies cover the loss of an index finger or a thumb, while others only cover the loss of an entire hand. Some policies cover accidents that occur while mountain climbing, while others do not. Some policies pay additional benefits if the victim was wearing a seat belt or riding public transportation. Terms vary, so it pays to shop around and review the coverage and any exclusions before purchasing an AD&D policy.

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