The Ins and Outs of AD&D Insurance
See how an AD&D policy can help supplement lost income in the event of an accident.
Near retirement, an East Coast couple purchased their dream home, taking out a mortgage based on the husband’s income. Then, tragedy struck. On a sunny afternoon, the husband was in a car accident and died instantly.
Despite the tragedy, there was a very small silver lining to the situation" The husband had taken out an accidental death and dismemberment (AD&D) insurance policy, says Carolyn Gorman, a vice president with the insurance Information Institute in Washington. The proceeds of that policy ensured that his widow would be able to keep paying the mortgage.
"Although accidental death and dismemberment insurance is not one of the more typical of insurance – such as life insurance–it makes great sense for those folks who would benefit most from such policies," says Gorman.
The dismemberment side of AD&D is very useful for people who are self-employed and don’t have benefits such as workers compensation, Gorman adds.
"If you are a person who is supporting a family and you work in an industry that is dangerous, then this is coverage you need," she says.
For example, a construction worker who was injured in an on-the-job accident and lost an arm would likely have his or her medical treatment covered by health insurance. However, the typical health insurance policy would not cover the loss of work associated with the lost of the limb.
"If you work with your hands and you have lost your hands, you are out of work." Gorman says. "That is where AD&D insurance steps in."
AD&D policies also usually pay benefits for the loss of fingers, sight and permanent paralysis. The nature of injuries covered by the policy and the amount paid by the insurer vary from policy to policy. As a result, AD&D insurance also supplements other types of insurance. For example, a person who loses a limb on the job would receive workers’ compensation for treatment of the injury while the AD&D policy would pay that person a lump sum. That money could be used to cover other expenses related to the injury.
If you are a person who is supporting a family and
you work in an industry that is dangerous, then this is coverage you need
Carolyn Gorman,
Insurance Information Institute
AD&D insurance is popular choice for many people in the business community, says Michael Barry, vice president of media relations at the Insurance Information Institute’s headquarters in New York. "It is a fairly well-known type of coverage especially in industries where there is a chance of fatalities or accidents–such as the construction industry or the manufacturing industry," he explains.
AD&D insurance not only differs from the life insurance but can complement a life insurance policy, experts say. For example, the beneficiary of a person insured with both a $100,000 life insurance policy and an accidental death rider would receive double the $100,000 payout if the policy holder were killed in an accident. (Keep in mind that death by illness, suicide or natural causes is usually not covered by an AD&D policy.)
The amount of benefits provided by the AD&D policy on the needs of the policy holder, Gorman says. Of course, the cost of an AD&D policy will reflect the amount of benefits paid out. "You need to consider how much or your dependents may need in order to maintain the lifestyle that you are accustomed to for an extended period of time," she says.
The way and AD&D policy pays out varies from insurer to insurer. Make sure to check the language in a policy for clarification.
AD&D insurance plans generally don’t require a medical examination before purchase, according to the insurance Information Institute, and the policies cover accidents that take place on the job, at home or anywhere. In most cases, AD&D policies follow a person around the globe, so if an accident takes place while on vacation, the policy holder is still covered.
Because AD&D policies do not cover death from natural causes or disease, it may not necessarily be for everyone, industry experts say. If a person’s job is not high-risk, he or she may consider investing in other types of insurance, such as life insurance.
After taking into account you line of work and the type of protection you want your family to have, you may decide an AD&D rider is right for you. For mor information on AD&D insurance, take a look at our FAQ.
