Might be thinking that an accidental death and dismemberment insurance policy will cover all your life insurance needs, unfortunately, that’s not true. This policy is very different from all other types of life insurance policies and knowing the difference is essential to get the right coverage for your requirements.
Standard life insurance will pay out upon the policyholder’s death no matter the reason, except for some exclusions given in the policy. It offers you an “all-cause” death benefit. However, accidental death and dismemberment payout for the accidental death causes only and injuries defined in the policy. It’s the main difference that says an AD & D policy would not be a replacement for a standard life insurance plan.
In this blog post, we will explore the differences between accidental death and dismemberment insurance and life insurance policies. Let’s get started!
Accidental Death and Dismemberment Insurance vs Life Insurance
An AD & D also differs from a life insurance policy because it is offered as a life insurance policy supplemental insurance. So when you purchase an AD & D policy it will be added up to another life insurance product.
As a supplemental rider, the AD & D benefit gives an additional death benefit to the beneficiary of the insured that is beyond the current death benefit limit mentioned on the insurance policy. For instance, if you get a $500,000 plan with a $200,000 AD & D rider and die in an accident, the insurance company will give a $700,000 death benefit to the beneficiaries. But if you die due to any other cause (illness or natural death), the payout will be limited to $500,000 for your life insurance plan.
For better understanding, it would be helpful to know the fundamentals of both types of coverages. Let’s have a look!
Life Insurance
Life insurance policies give financial security to you and your loved ones after your death. You have to pay premiums to keep your policy active and the death benefit will be given to your designated beneficiary once you are gone.
In addition, the most common types of life insurance policies are:
Term life insurance: Ends after the number of years mentioned in the policy.
Whole life insurance: This type of permanent life insurance remains active throughout life as long as premiums are paid. It also has a savings option and a cash value account.
Term life insurance could be the best option for people who want to save their income and give their family financial security to cover their end-of-life expenses or any debts including mortgage and personal loans. It’s a very affordable option that comes with tax restrictions and some other rules.
On the other hand, whole life and other types of permanent life insurance are for those who want to increase their investment portfolio. Individuals with long-term financial obligations or coverage needs can also buy this plan who want lifelong care.
Accidental Death and Dismemberment (AD &D) Insurance
This policy will cover death and injuries from accidents, but it won’t cover death from natural causes such as illness or old age. Accidental death and dismemberment also give a part of the benefit in some cases of injury or accidental loss of limbs. Meanwhile, it depends on your policy how much benefit you will get for several types of injuries.
Why choose an AD & D Insurance policy?
Although AD & D is not a replacement for the life insurance policy, it offers you valuable additional coverage at a very low price, particularly if it’s bought via your employer. It offers financial security for you in case you lose an eye, ear, limb, or any injury in an accident but life insurance won’t.
A regular life insurance policy will provide a death lump sum to your loved ones in case of your sudden death, while an AD & D rider will give an additional benefit when your death is completely unexpected and accidental.
Do you combine AD & D and life insurance policies?
Yes, if you want to! You can combine accidental death and dismemberment coverage with your life insurance plan as a supplement to your standard policy. However, you can buy AD & D insurance as a standalone plan to serve as a supplement to your already existing life insurance policy. But this standalone AD & D would be more suitable for people who do not qualify for standard life insurance plans but want some level of coverage.
What is the best time to supplement life insurance with an AD & D rider?
If you don’t have a life insurance policy or AD & D insurance coverage and want to get some extra coverage for accidents, you can get a standard life insurance plan along with an accidental death and dismemberment plan. The AD & D rider will increase your standard insurance policy’s death benefit if you die in an accident. Moreover, it pays a certain amount if you get through a qualifying accidental injury.
Sometimes you can’t add a rider after buying a life insurance policy, so ask about this rider before getting the policy. Typically, it is more reasonable to get a rider instead of going for a standalone AD & D plan. You can also compare rates and several coverage options to check out what suits you best.
Do you need both life insurance and an accidental death and dismemberment plan?
If you are concerned about getting injured accidentally, it will be better to get an AD & D plan or add a rider along with your standard life insurance plan. AD & D insurance offers coverage for accidental injuries as well as death while standard life insurance only pays death benefits after the insured’s death. The accidental death and dismemberment plan is not an exchange for a regular insurance policy, as it only applies to accidental cases while standard one has an all-cause death benefit.
When would you need AD & D insurance?
Standard life insurance will cover you for most death causes but won’t cover you for any non-fatal injury. Therefore, if you are already insured with a life insurance plan but concerned about the costs of any serious accidental injury, it would make sense to supplement your former policy with an AD & D standalone policy.
What if you already have a standard life insurance plan?
Most people ask if they still need an AD & D insurance plan when they already have a life insurance policy. Shortly, no you do not need an AD & D policy if you already have life insurance. But if you can afford a second policy, it would be beneficial to add an AD & D policy that is low-cost. It will add some extra protection for you against unexpected incidents.
The Bottom Line
That’s all for this blog post. We hope you got yourself clear with the confusion of standard life insurance and accidental death and dismemberment insurance plans. Both come with some perks and drawbacks so it is advisable to thoroughly read the terms and conditions of an insurance policy before buying it.
Moreover, you can also consult a professional or financial advisor who guides you to help you to get the best policy according to your requirements.