Life Insurance vs. Accidental Death & Dismemberment


If you’re covered by an accidental death and dismemberment (AD&D) policy, you may feel that you have all your bases covered as far as life insurance is concerned. But that’s not the case. You may be better off having a traditional type of life insurance.

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Term and permanent life insurance are two very different policy types compared to AD&D. When buying life insurance, it’s crucial that you know the differences to make sure you get the right coverage for your needs. 

This article will help you understand the differences between traditional life insurance policies, like term life and whole life, and accidental death and dismemberment insurance. When you’re finished reading, you’ll know which type of policy is best for you, or if you’d benefit from having both.

Overview: Life Insurance vs. Accidental Death & Dismemberment Insurance

Because we’re going to be talking about traditional life insurance in this article, let’s first define it and look at details about traditional life insurance, as well as AD&D insurance.

Traditional life insurance is an umbrella term for permanent life insurance coverage, like whole life insurance and term life insurance. 

Whole life insurance consists of two parts: a death benefit (also known as the policy’s payout) and a savings portion (also known as the cash value). When you pay your premium each month for the life insurance protection, part of the premium will pay for the death benefit, part of the premium will be allocated towards the cash value buildup, and part will pay the policy’s fees and expenses.

One of the primary reasons people buy whole life insurance is that the death benefit and premiums never change as long as you keep paying your premiums and because the cash value can be withdrawn or borrowed to pay for emergency expenses or other purposes like partially funding someone’s retirement income.

Term life insurance is different from whole life in that the policy is designed to be kept for a set period of years (1, 5, 10, 20), not someone’s entire life. At the end of that term, the insured can continue coverage, but it will be at a higher rate because they will be older when they apply for the new policy. Also, there is no cash value buildup with term life insurance, which helps make the premiums for term life lower than those of whole life insurance.

Accidental Death & Dismemberment Insurance (AD&D) is a type of life insurance with qualities of both term life and whole life. It can be bought as a standalone life insurance policy or as a rider on a permanent policy. It’s also known as “double indemnity” because it may pay a death benefit equal to or a multiple of (usually 2x) the face amount of the policy it is attached to as a rider.

AD&D is a supplemental type of life insurance and should not be considered acceptable as a substitute for a traditional life insurance policy.

Like term insurance, AD&D insurance costs less than whole life because it only pays for accidental death, not for death from both accidents and illnesses, like whole life.

AD&D resembles whole life insurance in that it’s a type of permanent insurance and the death benefit and premium remain the same throughout the life of the policy.

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Life vs. AD&D: What Do They Cover?

To answer that question, let’s look at both types of life insurance.

Traditional life insurance will pay a death benefit to your beneficiaries if you die from an illness or an accident (with some exclusions). Life insurance is going to pay the death benefit if you die from an illness, such as:

  • Heart attack
  • Cancer 
  • Stroke
  • Complications of multiple sclerosis
  • Respiratory failure
  • Kidney disease

Both traditional life and AD&D pay a death benefit if the insured dies from a “covered accident.” A covered accident might include:

  • Automobile accident
  • Motorcycle accident
  • Death from falling
  • Drowning
  • Electrocution

Accidents that aren’t covered might include:

  • Automobile or motorcycle racing
  • Scuba diving
  • Hang gliding
  • Skydiving
  • Bungee jumping

Another big difference between permanent life insurance and AD&D insurance is that AD&D will pay a benefit if you lose a limb, suffer partial or permanent paralysis, or lose your sight, speech, or hearing. AD&D policies typically won’t pay 100% of the face amount of the policy unless there is a combination of the loss of a limb and the loss of a major bodily function, such as sight in at least one eye or hearing in one ear.

The payout of the death benefit is also different with AD&D insurance. To be covered and have the death benefit paid, your death from an accident doesn’t have to be instant, but it usually must occur within a specified time frame, like 90 days.

With both permanent life and AD&D insurance, it’s essential that you read the policy before you accept it and find out what the life insurance company defines as “covered” and what’s not. Finding the best life insurance policy often depends on reading each policy carefully before you decide. 

Life vs. AD&D: What Are the Costs?

Traditional life insurance and AD&D rates are going to depend primarily on gender and age. The rates for AD&D are typically lower than they are for traditional life insurance because the coverage is limited to accidents and doesn’t pay out for death due to illness. 

Generally, the premiums for AD&D are tied to the amount of coverage you purchase and will vary from insurer to insurer. One insurer may charge $4.50 for every $100,000 in accidental death coverage, while the same coverage could cost $6.00 for every $100,000 with a different life insurance company.

Because rates can vary from insurer to insurer, you can often save money by shopping around for the best rate. While you’re shopping, you can also inquire into how much life insurance you may need.

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Life vs. AD&D: What Are the Typical Payouts?

The payouts for traditional life insurance will be the same if the causes of death are by accidental means, but remember that AD&D won’t pay out for death by illness. For example, a $100,000 term life insurance policy and a $100,000 AD&D insurance policy will both pay out the full $100,000 if you die from an accident while skiing, but the AD&D policy won’t pay out anything if you die from lung cancer.

The AD&D payout for dismemberment can vary depending upon the severity of the accident. For example, if you lose one thing – a hand, foot, or sight in one eye, you might receive a 50% payout of the face amount of the policy, but you could receive 100% if you lose two or more things, like a hand and foot.

Additionally, with AD&D, if your death is the result of an accident while traveling on public transportation, including an airplane, bus, or train, the payout to your beneficiaries can be double or triple the amount of your base coverage.

With AD&D, some insurers offer more options for additional benefits than others. Some insurance companies will pay an additional benefit if you were wearing a seatbelt during an accident causing death or dismemberment. Additional benefits could also be made part of the policy to provide funds to help pay for higher education for your children or legal, financial, and counseling services for a surviving spouse. 

Life vs. AD&D: Who Does (and Doesn’t) Need Them?

You need some type of life insurance, whether it be traditional life insurance or AD&D insurance, if there are other people who are dependent on your income. Life insurance helps survivors:

  • Pay off the mortgage
  • Fund children’s education
  • Meet monthly expenses
  • Care for an older adult, like a parent
  • Care for someone with a disability
  • Have a secure retirement

If your employer offers group life insurance and/or group AD&D insurance, it’s a good idea to apply for it if you’ve been declined for life insurance coverage individually because you have pre-existing medical conditions. Employer-sponsored life and AD&D insurance are usually “guaranteed issue,” meaning you don’t have to take a physical exam or answer any health questions on your application. Coverage is guaranteed to be issued.

You don’t need life insurance if you have no one dependent upon you for income, and you’re not leaving behind debts, like school loans or a mortgage, and you have enough savings to pay for your final expenses, like unpaid medical bills and funeral costs.

Many life insurance agents believe a term life insurance policy is better to have than AD&D insurance because it provides a payout for any cause of death, accidentally or from an illness (except suicide within the first two years of having the policy). And, if you’re younger and healthy, you can usually get term life insurance at a rate not much higher than that of AD&D insurance.

AD&D insurance also has limitations that can make it unattractive to buy. The chances of dying from an illness are greater than that of dying as the result of an accident. Among the leading causes of death, accidents come in number four behind heart disease, cancer, and chronic lower respiratory diseases.

AD&D policies often exclude deaths resulting from accidents related to high-risk occupations, such as race car driver or construction worker. Also, deaths caused by a drug overdose, drug or alcohol-impaired driving, complications from surgery, war, suicide, mental illness, and certain other circumstances will most likely not be covered.

AD&D policies exclude certain events, like riots or acts of war. For example, if someone dies from a terrorist attack, no death benefit is payable because that is considered an act of war. Insurers can make exceptions – this was done for victims of the 9/11 terrorist attacks on the United States.

 You also don’t need to enroll in your employer’s group life insurance or AD&D coverage if your employer doesn’t pay for it and you already have ample individual life insurance protection. Any type of insurance you buy at work is rarely portable if you leave the company, meaning you’ll be without coverage unless you find another employer.

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The Bottom Line

Both types of life insurance we’ve looked at are good to have for the financial protection of your loved ones and your peace of mind. If your employer is paying for life insurance as an employee benefit, you want to take full advantage of that and enroll in coverage as soon as you’re eligible. 

And when buying insurance, it’s always wise to do it when you’re young and healthy. Most serious medical events happen when we’re over age 50, and we never know when something serious might develop quickly. As the old adage says, “An ounce of prevention is worth a pound of cure.”


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