What is accidental death and dismemberment (AD&D) insurance?

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

Logan SachonDerek Silva

Logan Sachon & Derek Silva

Published October 2, 2019

KEY TAKEAWAYS

  • Accidental death and dismemberment insurance (AD&D insurance) pays a benefit if you die or are seriously injured from an accident

  • An AD&D policy usually costs $7 to $10 per month per $100,000 of coverage

  • Accept any free coverage from an employer, but term life insurance is cheaper in the long run and covers a lot more

Accidental death and dismemberment insurance, also called AD&D insurance or accidental death insurance is a type of insurance that pays out a benefit if you are injured or killed in certain accidents.

AD&D insurance is generally inexpensive, and it’s common for employers to offer a small policy to their employees as an alternative to life insurance. However, AD&D coverage isn’t nearly as robust as life insurance and it isn’t a good alternative.

Coverage amounts are generally low and come with many restrictions, so it usually makes more sense to just buy a term life insurance policy and get an AD&D rider (add-on) if you think you need it. Getting a life insurance policy when you’re younger will also mean big savings over time, since monthly premiums for term life insurance increase by 8% to 10% each year.

You should accept any free insurance coverage offered through your employer, but don’t go out of your way just to buy an individual accidental death and dismemberment policy.

Basically the only situation where you might benefit from a standalone AD&D policy is if your health insurance has high deductibles and you want the peace of mind that comes with knowing you (or your loved ones) will get a lump sum payment in case of an accident. Even then, there may be other types of insurance to consider.

In this article:

How AD&D insurance works

Accidental death and dismemberment insurance is actually two types of coverage in one policy. It includes 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 in an accident.

AD&D insurance generally covers (pays out a benefit) in a few situations:

  • Death in an accident, like a car crash or airplane crash
  • Death by murder
  • Loss of limb or finger
  • Loss of eyesight, hearing, or speech

Beyond that, there are many exclusions and things an AD&D policy won’t cover. For example, it won’t pay a benefit if your death is the result of a surgery or a crime you were committing. Individual states may also have their own exclusions to AD&D coverage.

If you are injured or killed by 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 the policy.

A more affordable option: term life insurance

Term life insurance pays out a death benefit if you die while your policy is active. It doesn’t make a difference whether you die in an accident or any other way. Terms usually last between 10 and 40 years.

Accidental death insurance is sometimes seen as an alternative to life insurance because getting coverage is inexpensive and it covers you in the case of accidents. An AD&D policy is not a good alternative to life insurance, though. Life insurance covers you no matter how you die and is probably cheaper in the long run.

Life insurance covers more, especially as you age

One reason to get life insurance instead of AD&D coverage is that life insurance covers you in more situations that may affect you as you age, including illness, while AD&D insurance only covers accidents. Some people may like that you don’t need a medical exam to get AD&D coverage, but if you don’t think you can pass a medical exam, your insurance needs likely go beyond what an AD&D policy covers.

Statistics from the CDC show that unintentional injury is the No. 1 cause of death for Americans between the ages of 1 and 44. At age 45, unintentional injury drops to the number three cause of death, with cancer and heart disease being the leading causes. So as you age, you’re more likely to die from a medical-related issue than an accident.

If you die from medical causes, an AD&D policy won’t pay out any benefit, leaving your family unprotected. This is especially useful to consider if you have dependent children, family members, or just a spouse who relies on your income to pay the bills.

AD&D coverage can be more expensive

It may seem logical to get an inexpensive accidental death insurance policy when you’re young, and then switch to a standard life insurance policy when you’re older. But that doesn’t make financial sense in the long run.

Getting a term life insurance policy is cheapest when you’re young and healthy. So getting a life insurance policy earlier can save you thousands of dollars each year as you age. If you get AD&D insurance when you’re young, the policy’s premium could cost just as much as (or more than) a life policy, but with much less coverage.

A healthy 30-year-old male can expect to pay a monthly life insurance premium of about $48 for a 20-year, $1 million policy. That price is also locked in for the entire length of your policy and if you need a smaller policy, you’ll pay even less. By age 40, premiums can go above $72. If you wait until you’re 50, a policy could cost you more than $177 per month. So when you’re 50, having a life insurance policy that you got at age 30 could save you $1,500 or more per year.

If you have more questions about how much life insurance costs, read our guide on understanding the cost of life insurance.

Sample quotes: AD&D insurance vs term life insurance

To illustrate the difference between AD&D insurance and life insurance, we pulled quotes for three scenarios. These quotes are for a healthy 35-year-old male who wants $500,000 in coverage until he’s 65 years old.

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

Scenario #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$35
Lifetime cost of policy$12,600

Scenario #2 is buying accidental death insurance to cover him until he’s 65. Accidental death insurance is usually priced between $7 and $10 per month per $100,000 dollars of coverage, so he can expect to pay about $35 per month for $500,000 of coverage.

With both types of insurance costing the same amount per month, it’s worth reiterating that term life insurance pays out a benefit no matter how he dies.

Scenario #2: Buy $500,000 AD&D policy at 35 and pay until age 65 (30 years)
Policy typeAD&D insurance ($500,000, month to month)
Ages covered35 to 65
Monthly premium$35
Lifetime cost of policy$12,600

Scenario #3 is a combo. Our example 35 year old gets an accidental death policy that’s $35 per month, but then at age 45 he realizes he should probably be covered for illnesses and infections, too. A 20-year term life policy at 45 will now cost him $48 per month, even if he’s healthy.

Scenario #3: Buy $500,000 AD&D policy at 35; swap for 20-year, $500,000 term life insurance at 45
Policy typeAD&D insurance ($500,000, month-to-month)Term life insurance ($500,000, 20-year term)
Ages covered35 to 4545 to 65
Monthly premium$35$48
Lifetime cost of policy$4,200$11,520
Combined lifetime policy cost$15,720

As the tables above show, it’s cheaper in the long term and makes more sense to just get a term life policy when you’re young, instead of paying for accident insurance. The one potential tradeoff is that AD&D insurance may also pay out if you get seriously injured.

Learn more about life insurance vs accidental death and dismemberment insurance.

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AD&D insurance vs disability insurance

Another alternative to consider is disability insurance. Disability insurance works by replacing a portion of your income when you’re unable to work.

Disability insurance is worth consideration as a standalone policy or in conjunction with a life insurance policy because more than one in four workers will become disabled before they retire, according to the Council for Disability Awareness. Illness is also a more common cause of disability than injury, so disability insurance is more likely to cover you than AD&D.

However, disability insurance on its own is often expensive. One alternative is Social Security disability insurance (SSDI). SSDI insures people who have a disability or a medical condition that will last at least one year and prevent them from working. There are strict eligibility rules, like needing to have paid Social Security taxes for a certain amount of time, but SSDI can be a big help to you and your family after becoming disabled.

Learn more about how disability insurance and SSDI work.

AD&D riders

A standalone AD&D policy doesn’t usually make sense but many life insurance companies offer an optional accidental death and dismemberment rider that you can add to your insurance policy for an extra fee.

A rider is an add-on that allows you to get additional coverage or tailor an insurance policy to your specific needs. The AD&D rider offers a payout beyond 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 type.

Costs of accidental death benefit riders vary by carrier and policy, but $50,000 of coverage would likely cost less than $100 extra per year (about $8 per month).

There are other types of riders that make similar payouts and cover various illnesses or diagnoses. These are called living benefits because they may pay out a benefit if you get certain illnesses before you pass away. Examples include critical illness and chronic illness riders.

To understand what kind of riders may be right for you, it may be easiest to talk to a life insurance expert.

AD&D insurance vs accident insurance

Accident insurance is another type of insurance that’s similar to accidental death and dismemberment insurance. Also called supplemental accident insurance or personal accident insurance, it pays out a lump sum if you are injured in any type of accident. Unlike AD&D insurance, you do not need to sustain a serious injury to get the benefit. Your policy will list what each type of injury is worth. Accident insurance policies also pay out for accidental death.

Accident insurance policies are commonly offered as a group benefit through employers. Several companies also offer individual plans, and you may get offers from a credit union or bank.

Ads for accident insurance often describe it as a cheap alternative to life insurance. However, the benefit amounts for accident insurance 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 or disability 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.