How accidental death and dismemberment insurance (AD&D) works

AD&D insurance is usually offered by employers as an alternative to life insurance, but it’s generally inexpensive if you buy a private policy. However, because AD&D insurance isn’t nearly as robust as life insurance, it shouldn’t completely replace your life insurance coverage. If you can afford it, a separate AD&D policy can supplement your life insurance coverage. But you can also add an AD&D rider to your life policy.

What is accidental death and dismemberment insurance?

AD&D pays out if you die in an accident (the accidental death part of the policy) or if an accident causes you to lose a hand, foot, or limb (the dismemberment part of the policy).

Because AD&D only pays out under specific circumstances, it’s not a suitable substitute for life insurance. Whereas AD&D insurance only pays out if you are injured or killed in an accident, life insurance pays out for most causes of death. 

→ Learn more about the difference between life insurance and AD&D insurance

What does accidental death and dismemberment insurance cover?

AD&D insurance generally covers:

• Death in an accident, like a car crash or airplane crash

• Death by murder

• Loss of limb or finger

• Loss of sight, hearing, or speech

If you are injured or killed in an accident, you or your family can make a claim with your insurance company. The insurer will then pay a benefit amount based on your injuries (or death), as listed in your policy.

What doesn’t accidental death and dismemberment insurance cover?

AD&D policies have a number of exclusions for accidents. For example, it won’t pay a benefit if your death is the result of something going wrong during a surgery. Individual states also have their own exclusions to AD&D coverage.

AD&D insurance won't pay out if you die in one of the following ways:

• Activities considered high risk by insurers, such as skydiving

• Drug overdose

• Drunk driving

• Illness, such as a heart attack

• Natural causes

• Suicide

At the end of the day, an AD&D insurance policy won’t pay out for most causes of death. Policies will only pay out from accidents. 

The cost of AD&D insurance 

An AD&D policy usually costs $7 to $10 per month per $100,000 of coverage, but how much you actually pay for AD&D insurance depends on your age. The older you are, the higher your premiums — much like most other types of insurance. 

Regardless, AD&D insurance tends to cost less than a traditional term life insurance policy — but comes with the caveat of coverage limitations and a big chance that your family won’t actually receive the benefit. There is a high likelihood that traditional life insurance will pay out compared to an AD&D policy, so a traditional term life insurance policy offers more value for its cost.

Who needs accidental death and dismemberment insurance?

AD&D insurance is best suited for anyone on a tight budget with dependents who would financially suffer in the event of your impairment or death. It can be a valuable financial safeguard if you cannot afford traditional life insurance, as it costs less. There is no medical underwriting, and anyone can buy a policy as long as they meet age requirements.

Alternatives to AD&D insurance

The best alternative to a standalone AD&D insurance plan on top of your insurance policies is an AD&D rider that you can add on to your life insurance policy for an extra fee.

The AD&D rider offers a bigger payout than your standard death benefit if your cause of death is an accident that the rider covers. The rider will also pay a set amount if you lose a limb or digit from a covered accident but do not die. 

Costs of accidental death benefit riders vary by insurance company and policy, but $50,000 of coverage would likely cost less than $100 extra per year, or about $8 per month — which isn’t that much more than a standalone policy. 

Is AD&D insurance worth it?

As a standalone policy, AD&D insurance doesn't provide robust enough coverage. Life insurance and disability insurance provide better security and don’t have payout limitations like AD&D insurance does. If you can afford it, adding a supplemental AD&D rider to your life insurance policy creates even more comprehensive coverage that would pay out even if you survived an accident. 

But if you're unable to afford a traditional life insurance policy, AD&D insurance is a good alternative. Because of its low cost, it ensures that you have at least some coverage to financially protect your family if you become impaired or die in an accident.