How Does Accidental Death Insurance Work?

Insurance helps protect against losses resulting from car accidents, health issues and other unfortunate events life may throw your way. The average consumer may have multiple insurance policies throughout their lifetime. Sometimes it can be tricky knowing which types of insurance you need and how much coverage you should get. You may have heard about accidental death and dismemberment insurance through a job, a family member, a TV commercial or an internet ad. But what exactly is it, how is it different from regular life insurance, and how does it work? What is Accidental Death and Dismemberment Insurance? Accidental death and dismemberment insurance (AD&D) offers coverage for when the unexpected occurs, such as a life-altering injury or accidental death. With regular life insurance, the beneficiary will receive the death benefits funds if the insured dies within a term (term life insurance) or at any time (whole life insurance). The payout of the benefits is typically not dependent on the cause of the insured’s death. AD&D policies can be relatively inexpensive when compared to regular life insurance policies. They can be purchased as stand-alone policies or as riders. Riders are also commonly referred to as double indemnity riders. With an AD&D rider, the designated beneficiary would receive benefits from both the regular life insurance policy and the rider, should the insured’s death fall into the category of accidental as defined by the rider. In additional to accidental death, AD&D policies cover the insured in the event of dismemberment or other covered life-altering injury. Since AD&D covers two categories of possible events, each is discussed in more detail below. Accidental Death: How Does It Work? Typically, the benefits for AD&D are capped at less than what you can get with a traditional life insurance policy. For this reason, many opt to have a regular life insurance policy in place with an AD&D policy as additional coverage. The obvious question is “what constitutes an accidental death” Before purchasing AD&D, it is critical to review the coverage restrictions. Most AD&D policies cover car accidents, exposure to elements, falls and drowning. Common exclusions include deaths resulting from drug overdoses and suicide. Deaths deemed from natural causes, including heart attacks and strokes, would not be covered under AD&D insurance. Dismemberment: How Does it Work? When you purchase an AD&D policy, the policy will have a face amount. During the term of the policy, policies will pay out 100 percent of that amount for accidental death. AD&D policies also pay out a percentage for covered life-altering injuries such as loss of limb (dismemberment) and paralysis, as well as loss of hearing, sight, speech, or use of specific body parts. Not all injuries, even serious ones, will be covered. Again, it is critical to carefully read your policy to understand what is covered and what isn’t. Filing an AD&D Claim In the event of a policyholder’s death, the named beneficiaries would receive the payout. Most regular life insurance policies require proof of the insured’s death in the form of a death certificate. The beneficiary might also need to provide the insurance company with updated personal information. Accidental death policies work differently. Insurance companies cannot pay claims until they have received the documentation necessary to prove that the death was, indeed, accidental. Documentation might include a death certificate, police reports and medical examiner reports. In cases of dismemberment or other covered injuries, it is the insured who would file to collect the money. In most cases, these payouts are only a portion of the policy’s face amount. In fact, it is unlikely that the insured would ever receive the full benefit unless they suffered serious and multiple covered injuries. Accidental death and dismemberment insurance can’t take the place of a regular life insurance policy, as deaths from natural causes aren’t covered. What they can do is provide additional coverage for your loved ones in the event of your accidental death and provide you with a financial lifeline if you suffer an injury covered by the policy.