Accidental Death and Dismemberment (AD&D) Insurance: What to Know

Accidental death and dismemberment (AD&D) insurance coverage is important and can add greater protection to a life or health insurance policy. Employers often provide AD&D coverage as a benefit to employees so that workers and their families have coverage in the event of death or serious injury in an accident.

Here’s what you need to know about what accidental death and dismemberment insurance is, how it works, and whether it needs to be part of your insurance portfolio.

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

An AD&D insurance policy pays out a lump sum if a covered accident causes the insured person to die or be dismembered.1

AD&D coverage and life insurance have some similarities. Both pay out a benefit if the insured person dies. But they’re not the same kind of insurance. 

Life insurance pays out a death benefit even if the insured dies of natural causes, while AD&D only pays if the death is the result of a covered accident. Additionally, life insurance doesn’t offer a benefit if the insured person is dismembered in an accident, while AD&D does.

Since AD&D insurance only pays out in limited circumstances (if you suffer specific injuries or death from a covered accident) it tends to be cheaper than life insurance, which pays out for non-accident-related deaths.

You can purchase AD&D as a stand-alone policy, but it may also be included as a rider on a life insurance policy or a health insurance policy. Employers who offer AD&D to their workforce typically include it as a rider to one of these types of policies at no additional cost to the employees.

How does AD&D insurance work?

With an AD&D policy, the insurance company pays out a lump-sum benefit to you (or your beneficiary) if an accident causes you to die or be dismembered.

For AD&D insurance, dismemberment means:2

• Permanent or partial loss of one or more limbs

• Permanent or partial paralysis of one or more limbs

• Complete or partial loss of sight, hearing, or speech

To receive a benefit payout from an AD&D insurance policy, the insured person must have suffered injury or death in an accident covered by the policy. Unlike life insurance, which only pays out to your beneficiaries after you pass away, you may receive an AD&D benefit while you’re still living.

But the AD&D benefit amount isn’t the same for every death or injury. Your beneficiaries will receive the full benefit payout from your AD&D policy if you die in a covered accident. But the dismemberment benefit you receive will depend on the severity of your injury.

Here’s a common payout structure for AD&D policies:

What AD&D insurance covers

If you have AD&D insurance, your policy will pay out the benefit if you die, lose a limb or limbs, or lose sight, hearing, or speech as a result of an accident. For example, your AD&D policy will pay out a death benefit to your beneficiaries if you die in a car accident. You’d also receive a payout if you slipped on some ice and hit your head, causing vision loss.

In other words, AD&D insurance pays a benefit if you’re killed or seriously injured in an unexpected, unforeseen accident.

What AD&D insurance doesn’t cover

Like all insurance coverage, AD&D policies exclude certain situations and events. Specifically, your AD&D coverage won’t pay out a benefit for the following types of events:

• Death by natural causes: AD&D protects against accidental death. It won’t cover natural deaths from illness, disease, or old age.

• Dismemberment caused by illness: A number of illnesses and ailments can cause loss of limb, sight, hearing, or speech. For example, diabetes can lead to limb amputation. AD&D doesn’t cover these kinds of illness-related dismemberments.

• Suicide or self-inflicted injuries: AD&D policies won’t pay if the insured person dies or is injured by their own hand. For example, AD&D generally won’t pay in cases of overdose.3 It likely won’t pay if mental illness results in a physical injury or death.

• Death or dismemberment caused by high-risk activities: High-risk recreational activities, such as skydiving or bungee jumping, potentially could result in accidents, and AD&D insurance is meant to protect you from unforeseen accidents.

• Accidents involving alcohol or drug use: If you get into an accident while under the influence of alcohol or drugs, your AD&D insurance won’t pay out your benefit.

• Accidents that occur while committing a crime: If your accidental injury occurred while you were committing a crime, felony, or assault, you won’t receive your benefit payout.

• Accidents that occur because of war or armed conflict: Whether war is declared or undeclared, if you’re killed or injured during a war, act of war, or other armed conflict involving a military or other organized force, your AD&D policy won’t pay out.

Life insurance vs. AD&D insurance

Although life insurance and AD&D insurance have some similarities — both offer a payout upon death — they also have some important differences.

In most cases, life insurance will pay out the death benefit regardless of the cause of death, while AD&D only pays out if the death occurs because of an accident. For example, life insurance would pay out after an insured person died because of a heart attack, while AD&D wouldn’t.

Life insurance only pays out upon the death of the insured. The insured person will never see the payout from their life insurance policy. An AD&D policy offers a payout to the living policyholder if they’re dismembered in a covered accident. That means you may see the benefit from an AD&D policy while you’re still alive.

Pros and cons of AD&D insurance

AD&D insurance coverage has some drawbacks as well as benefits. Understanding the advantages and disadvantages of this kind of insurance can help you decide if it’s the right coverage for your needs.

How much does accidental death and dismemberment insurance cost?

Since AD&D only covers a limited number of situations, it’s generally cheaper than life insurance.

Insurers know that anyone buying a life insurance policy will eventually pass away. But an AD&D policyholder may or may not get into an accident that causes death or dismemberment. Since the types of accidents that would prompt an AD&D payout are relatively rare, the cost to purchase this kind of coverage is low.

AD&D coverage is usually available in $1,000 coverage blocks, and consumers typically pay less than $1 per coverage block per month. For example, if you want $100,000 in AD&D coverage and each $1,000 coverage block costs $0.04 per month, you’ll pay $4 per month for that level of coverage.

How to get AD&D coverage

If you’re interested in buying AD&D coverage, follow these steps:

How to choose AD&D coverage levels

You can usually purchase AD&D coverage in increments of $5,000 to $10,000, starting at the minimum benefit level up to the maximum amount, which is typically around no more than $500,000.

Remember that the severity of your injury determines your payout if you’re dismembered in an accident. You’ll receive 50% of the full benefit if you lose one limb or lose sight in one eye.

To calculate your AD&D coverage needs, start by figuring out how large a payout you’d need if you lost the use of a limb in an accident — then double it. That means a concert pianist might need a higher coverage level than a social worker since the musician can’t work if they don’t have both hands.

Do you need AD&D insurance?

Every person’s situation is different, so it can be tough to decide if this kind of coverage is something you need. To figure out if AD&D is right for you, start by considering your personal risk factors, including:

• Lifestyle: Do you have a lifestyle that makes you more likely to get into an accident? For example, if you work in a physically demanding job, spend a lot of time driving, or travel frequently for work, AD&D insurance might be right for you.

• Income sources: How would losing a limb or your sight, hearing, or speech affect your ability to make a living? If you’d be unable to work in your current job after a disabling accident, AD&D insurance may be an important protection for you.

• Current insurance coverage: Do you have enough life insurance to provide for your family in the event of your sudden death? AD&D isn’t a replacement for life insurance, but it can be a low-cost way to increase the payout your beneficiaries would receive if you pass away in an accident.

Accidental death and dismemberment FAQs