It is not uncommon for you to see the terms “life insurance” and “accidental death and dismemberment”, also known as “AD&D” grouped together as though they are interchangeable or always linked together. However, there is a difference between the two, and you should understand what that is in order to make sure you get the best coverage possible.
So, let’s discuss.
Life insurance, or rather, standard life insurance, consists of a policy that is either permanent life insurance or term life insurance, with a death benefit paid to the beneficiaries upon the insurance holder’s death. On the other hand, Accidental Death and Dismemberment insurance consists of policies that only pay out a death benefit when the cause of death is not due to illness or what is generally considered natural causes.
What Does AD&D Cover Exactly?
As stated above, “accidental death and dismemberment” pretty much constitutes anything that does not fall under illness or a natural kind of death that typically happens due to old age. This means anything from traffic accidents, exposure to a dangerous substance, heavy machinery/equipment accidents, drowning and falls to homicide and even suicide.
A general life insurance policy will cover these kinds of things as well (usually), but the AD&D policy will, again, cover only these accidents and “untimely” deaths.
Which Kind Do I Need?
Everyone’s life insurance needs are different, so there is no one response to this question that suits every person who asks it. That said, there are a surprising number of benefits to having AD&D life insurance that do not necessarily come with other kinds of life insurance policies. The most notable is the cost. Because they only cover “accidental” deaths, AD&D policies are typically a lot cheaper than regular life insurance. This is very convenient for some people, especially those who do not anticipate having dependents later in life.
Let’s look at an example. Say Jane is a 45-year-old mother of one who knows her child will be out of the house and living independently within 15 years. She is a nonsmoker and is currently is decent overall health. Because of this, she feels it is extremely unlikely she will die of illness or “natural causes” within that time period. So, she applies for AD&D insurance policy and is offered rates as low as $8.87 per month. Had she applied for regular life insurance, her rates would have been, at best (she would have to get preferred plus rates), between $12 and $30 for this kind of coverage.
You should also keep in mind that an AD&D policy goes into effect immediately, and anyone can qualify for it. So, an AD&D a viable alternative if and when you are unable to get a traditional life insurance policy for whatever reason (and there are many things that do keep people from getting approved). This way, at least some forms of death are covered. After all, you never know what could happen!