Life Insurance vs. Accidental Death and Dismemberment

(Compare and contrast these two coverages)

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Accidental death and dismemberment (AD&D) insurance is often confused with standard life insurance. AD&D insurance is certainly a type of life insurance, but it is not the standard life insurance policy that most people take out during their life. 

There are significant differences between AD&D and standard life insurance that could help clarify which policy is right for you.

Accidental death and dismemberment insurance, as the name implies, protects you and your family financially in case of an accident that is fatal or results in dismemberment or disability. 

Life insurance, on the other hand, covers a person for a certain amount of time and will pay the amount of the insurance policy if the policyholder dies during that period. Both insurance policies have benefits and circumstances that are not covered.

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What Is Covered by Life insurance?

Life insurance pays out in the event of the policyholder's death. If the policyholder dies within the time frame set out by the insurance policy, their beneficiaries will receive the death benefit. 

Life insurance policies can be purchased for certain terms or a lifetime and for varying death benefits. There are many types of life insurance products, but all are based on the three standard types:

  • Term insurance: This is purchased for periods from one year to thirty years. At the end of the term, the premium increases if the insured wants to continue the policy. Like permanent insurance, insurance carriers offer many types of riders so that the policy can meet the specific needs of the insured.
  • Whole life insurance: This is considered permanent insurance, since the policyholder does not intend to ever let the policy lapse. The premiums for the policyholder’s entire life expectancy are calculated and broken down into monthly or annual payments. The premium is set when the policy is issued and will never increase during the life of the policy.
  • Universal life insurance: This type of policy, although considered permanent insurance, is actually a term policy with an annuity attached, acting as a cash account. A UL policy can be set up to run for the lifetime of the insured by using the cash account combined with the premium to keep the policy in force.

Life insurance rates are based on different underwriting factors, and there are two that affect the policy rates the most: age and health of the applicant when the policy is purchased.


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Adding an AD&D Insurance Policy

AD&D insurance is a type of policy that covers accidental death or severe injury in an accident. This kind of insurance can be purchased as a rider on a life insurance policy, often to increase the death benefit, or as a standalone policy. 

To get an insurance payout from an AD&D policy, death or dismemberment has to be proven to be caused by an accident. Some injuries result only in a partial payout of the policy.

AD&D insurance can cover the loss of speech and hearing, sight in one or both eyes, an arm or leg, or a thumb or index finger. If death or injury occurs more than three months after an accident, the benefit might not be paid out because the resulting death or injury was outside the specified insurance policy time frame.

Life Insurance vs. Accidental Death and Dismemberment Insurance

There are a few main differences between life insurance and AD&D insurance.

Life insurance typically provides more coverage than AD&D insurance. Life insurance covers instances of death resulting from illnesses or natural causes, which AD&D insurance does not. Term life insurance is costlier than AD&D insurance, but covers accidents as well.

In the first two years of a life insurance contract, two things can allow the insurer to deny a claim:

  • Suicide. If the death of the insured is determined to be the result of suicide, the claim will be denied.
  • Misrepresentation. In most states, the first two years of an insurance contract are known as the contestability period. If the insured dies during that period, the insurance carrier is allowed to investigate the policy application for omissions or misrepresentations. If either is found and proven, the carrier will return the premiums paid and deny the death claim.

AD&D insurance is helpful supplemental insurance that is sometimes available through employers. It will cover deaths resulting from many vocations or hobbies that standard life insurance will not cover, such as skydiving and scuba diving, but the policy typically excludes coverage if the death results from drug abuse, intoxication, or any illegal activity. 

AD&D insurance does not require a medical exam for policyholders, and the insurance premium costs are lower because AD&D insurance has a very low historical mortality rate.

Individuals with uninsurable medical conditions may find that AD&D insurance is the only kind of life insurance policy they can take out, unless they elect to pay very high premiums for "guaranteed issue" whole life insurance.

When to Consider AD&D Insurance vs. Life Insurance

Accidental deaths are on the rise in the U.S., although the overall odds of dying in an accident remain very low. The Centers for Disease Control and Prevention reported that 130,557 of 2.5 million deaths in the U.S. in 2013 were accidental.

Young people under the age of 25 are the most likely to be killed in automobile accidents, which are typically attributed to driving while distracted or under the influence of alcohol. 

An increasing number of people of working age (aged 25-65) die from accidental deaths from drug misuse or overdose, with accidental prescription drug overdoses rising. Elderly people 65 and older are most likely to die from accidents because of falls, usually in their homes.

Accidental death and dismemberment insurance does not cover death by all accidents, however. High-risk situations and activities that aren’t covered may include:

  • Drug overdose
  • Drunk driving
  • War
  • Surgical complications
  • Mental illness
  • Suicide

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Comparing AD&D Insurance and Life Insurance

The difference between life insurance and accidental death insurance comes down to what kinds of death are (and aren’t) covered. If you want to learn more about accidental death and dismemberment insurance and life insurance, contact an independent insurance agent

These local agents work independently and can find the right kind of insurance to fit your unique needs. Contact an independent agent today to compare different kinds of AD&D insurance and life insurance.

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