Life Insurance vs. Accidental Death & Dismemberment (AD&D) Insurance
- Insurance protects you and your loved ones against potential losses. Learn about life insurance vs. accidental death & dismemberment (AD&D) insurance to find out what type of coverage you need.
An insurance policy protects you against potential losses, making it easier to maintain your financial stability in the event of an accident, serious illness or unexpected death. Two of the most common types of policies are life insurance and accidental death and dismemberment (AD&D) insurance.
Both types of coverage offer valuable protection, but they don't cover the same things, so it's important to understand how they work. Keep reading to learn more about life insurance vs. accidental death & dismemberment (AD&D) insurance.
Insurance Overview
Life insurance pays out for many causes of death, while accidental death and dismemberment (AD&D) policies only pay out if your death occurs due to an accident. AD&D policies also pay out when an insured individual sustains certain types of accidental injuries. Since life insurance pays out for more causes of death, it's a little more comprehensive than AD&D insurance. Before you buy a policy, it's important to understand how each type of insurance works.
Life Insurance
When you purchase a life insurance policy, you pay a monthly, quarterly or annual premium to keep the policy active. If the policy is still active when you die, your beneficiary receives a death benefit, which is typically paid as a lump sum. Whole life is considered permanent life insurance. As long as you keep paying the premiums, the policy remains in effect. Term life is less expensive than whole life because it expires after a certain amount of time. For example, you may buy a policy with a 20-year term, which means your coverage will expire in 20 years.
Accidental Death and Dismemberment (AD&D)
What makes AD&D insurance different from life insurance is that it only pays out in the event of an accident. If you die from natural causes, your beneficiary won't receive a death benefit. This type of policy also pays out if you have an accident that results in a serious injury or loss of limb. If you purchase AD&D insurance, review your policy carefully to determine how much it pays for each type of injury.
Which Is Better, Life Insurance or AD&D?
In most cases, life insurance is the better buy because it covers more causes of death than AD&D insurance. If you're concerned about the risk of sustaining a serious injury, then you may benefit from purchasing an AD&D rider on your term life policy.
Coverage Comparison: Life Insurance vs. Accidental Death & Dismemberment (AD&D) Insurance
As noted previously, accidental death and dismemberment policies only pay out if you die in some type of accident. Life insurance policies pay out for several causes of death. The table below offers an overview of when life insurance pays and when accidental death and dismemberment pays. It also shows what type of coverage is available if you combine term life with an accidental death and dismemberment rider.
|
Scenario |
Term Life Policy |
AD&D Policy |
Term Life + AD&D |
|
Death by natural causes/illness |
Yes |
No |
Yes |
|
Death by suicide |
Yes |
No |
Yes |
|
Death by homicide |
Yes |
Yes |
Yes |
|
Death by drug overdose |
Yes |
No |
Yes |
|
Death by accident (e.g. auto accident) |
Yes |
Yes |
Yes |
|
Loss of limb, speech or hearing |
No |
Yes |
Yes |
Do You Need AD&D Insurance if You Have Life Insurance?
If you have a strong life insurance policy, you generally don't need AD&D coverage. Accidental death and dismemberment policies don't pay out if your death is due to any of the following causes:
- Illness
- Drug overdose
- Suicide
- Driving under the influence
- Injuries sustained while committing a crime
- Injuries associated with military service
- Injuries that occurred before your policy went into effect
- High-risk activities, such as SCUBA diving and flying an airplane
If you have insurance through your employer, check your policy documents to determine if it's a traditional life insurance policy or an AD&D policy. Many companies offer AD&D insurance, leaving beneficiaries surprised when the policy won't pay out after the death of a covered individual. If your policy excludes several causes of death, you may want to purchase a term or whole life insurance policy for extra peace of mind.
Adding an AD&D Rider to Your Insurance Policy
Another option is to add an AD&D rider to your regular life insurance policy. The rider entitles your beneficiary to extra funds if your death is caused by an accident, giving them even more financial protection. If you have limited funds and have to choose life insurance vs. accidental death & dismemberment (AD&D) insurance, life insurance is the more comprehensive option.
