Accidental death and dismemberment insurance

A policy that pays out if you die in an accident, but not if you die from an illness.

Logan Sachon

Logan Sachon

Published November 5, 2018

Accidental death and dismemberment insurance, also called accidental death insurance or AD&D insurance, is actually two types of coverage in one policy: an accidental death policy, which pays out when you die in an accident, and a dismemberment policy, which is a type of accident insurance that pays out if you lose a limb or digit due to an accident.

Some companies sell accidental death and dismembership insurance or just accidental death insurance as an alternative to life insurance, but the coverage is nowhere near as robust as term life insurance and it isn’t a good alternative.

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How accidental death and dismemberment insurance works

If you have an accidental death and dismemberment policy, you or your family can make a claim if you are injured or killed by an accident. You will receive a set sum based on your injuries (or death), as listed in the policy.

There are three ways to get accidental death and dismemberment coverage:

  1. Purchase an individual policy
  2. Get added to a group plan through work
  3. Add an accidental death and dismemberment rider to your life insurance policy

The coverage amounts are low and come with many restrictions, so it rarely makes sense to purchase an individual accidental death and dismemberment plan. But you should accept any free coverage offered through your employer, and it’s also possible to add an inexpensive rider to your life insurance policy (more below).

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Accidental death and dismemberment insurance vs. life insurance

Accidental death insurance may seem like a good alternative to life insurance, but it can leave your family vulnerable and unprotected.

According to statistics from the CDC, unintentional injury is the number one cause of death for Americans from ages one to 44. But at age 45, unintentional injury drops to the number three cause of death, quickly usurped by cancer and heart disease. As you get older, the chances of dying from a medical-related issue as opposed to an accident are much higher, and accidental death policies leave your family unprotected.

Accidental death insurance doesn’t make sense, even if you’re young.

It may seem that it makes sense to have accidental death insurance when you’re young and then switch to life insurance when you’re older, but as you become statistically more likely to die from a health-related cause, your life insurance prices increase, too.

If you wait until age 45 to purchase a life insurance policy, you could end up paying significantly more each month — even up to double — than if you purchased the same policy 10 years earlier.

Learn more about life insurance vs accidental death and dismemberment insurance

Sample quotes: Accidental death insurance vs. term life insurance

Option #1: Buy 30-year, $500,000 term policy at age 35
Policy typeTerm life insurance ($500,000, 30-year term)
Ages covered35 to 65
Monthly premium$30
Lifetime cost of policy$10,800
Option #2: Buy $500,000 accidental death policy at 35 and pay until age 65 (30 years)
Policy typeAccidental death insurance ($500,000, month to month)
Ages covered35 to 65
Monthly premium$35
Lifetime cost of policy$12,600
Option #3: Buy $500,000 accidental death policy at 35; swap for 20-year, $500,000 term life insurance at 45
Policy typeAccidental death insurance ($500,000, month-to-month)Term life insurance ($500,000, 20-year term)
Ages covered35 to 4545 to 65
Monthly premium$30$48
Lifetime cost of policy$3,600$11,520
Combined lifetime policy cost$15,120

We pulled sample quotes for a healthy 35 year old male who wants $500,000 in coverage until he’s 65 years old.

Option #1 is buying a term life insurance policy. If, at age 35, he applies for a $500,000 30-year term life policy, he’d pay just $30 per month.

Option #2 is buying accidental death insurance to cover him until he’s 65. Accidental death insurance is usually priced at $7 or $8 per month per $100,000 dollars of coverage, so he can expect to pay about $35 per month for $500,000 of coverage.

Already, it makes more sense for this man to purchase term life insurance. It pays out no matter how he dies, and it’s cheaper than accidental death insurance.

Option #3 is a combo. He chose the accidental death policy, paying $35 per month for coverage — then at 45, realized he should probably be covered for illnesses and infections, too. But even if he’s still healthy, if he applies for a term life policy at 45, he’ll now pay $48 per month for a 20-year plan to cover him until he’s 65.

This illustration above shows that the prices for the limited coverage of accident insurance simply don’t make sense if you can qualify for a more robust term policy.

Accidental death and dismemberment riders

Many life insurance companies offer an optional accidental death and dismemberment rider that you can add to your life insurance policy for an extra fee.

These riders offer an additional payout beyond your death benefit if your cause of death is an accident type that is listed in the rider. This rider will also pay out a set amount if you lose a limb or digit from an accident type listed in the rider.

Costs of accidental death benefit riders vary per carrier and policy, but $50,000 of coverage would likely cost less than $100 extra per year.

There are other types of riders that make similar payouts for various illnesses or diagnoses. These are called living benefits, and examples include critical illness and chronic illness riders.

Read more about life insurance riders.

Accident insurance vs. accidental death and dismemberment insurance

There is another type of insurance called accident insurance that is similar to the “dismemberment insurance” part of accidental death and dismemberment insurance.

Accident insurance, also called supplemental accident insurance or personal accident insurance, pays out a set lump sum if you are injured in any type of accident. Your policy will list what each injury type is worth. Accident insurance policies also pay out for accidental death.

Accident insurance policies are commonly offered as a group benefit through employers, but several companies offer individual plans, and you may get offers from credit unions or banks or see ads offering them as cheap alternatives to life insurance.

The benefit amounts are low — generally a few hundred or a few thousand dollars, depending on the severity of the injury. A much better way to protect yourself in case of an accident is through health insurance and disability insurance.

Read more about accident insurance.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.