Accidental death and dismemberment insurance is a type of life insurance. It can either be a rider to an existing policy or a standalone policy. In this article, we will go over the basics of how accidental death and dismemberment insurance works.
What is Covers
AD&D insurance will provide coverage for you or your family in the case of an accident. The definition of these terms will differ between insurance companies and policies, but they generally follow the same guidelines. Accidental death generally covers death due to such circumstances as exposures to the elements, a traffic accident, homicide, drowning, or an accident due to the use of heavy equipment. Dismemberment is typically defined as the loss of a limb, partial or permanent paralysis, and/or the loss of sign, hearing, or speech.
If you die under the terms of the policy your beneficiaries will receive the full death benefit. On the other hand, if you qualify under the definition of dismemberment, you will receive living benefits. This means the insurance company will pay directly to you a percentage of your death benefit while you are alive. The percentage you will receive will depend on how your policy reimburses you for the type of injury. It is very rare to receive a 100% payout under dismemberment. To qualify you typically must prove the combination of the loss of a limb and the loss of a major bodily function, such as loss of sight or hearing in one eye or ear.
What It Does Not Cover
There are certain circumstances under which your policy may not payout. You or your beneficiaries may not receive a payout if death or injury happens due to one of the following circumstances:
- Death from illness or natural causes
- Injuries from war
- Due to the influence of alcohol
- Participating in a riot
- Due to a felonious act
- As a professional athlete during a sporting event
- Car racing
- Flying a place
- Participating in extreme sports, such as sky diving or scuba diving
Types of Policies
There are two ways you can get accidental death and dismemberment insurance coverage. The first way is through a standalone policy. You can purchase this type of policy through an insurance company or through work. The premiums are typically inexpensive. Like other policies, your premiums will be based on the among of coverage that you purchase. The second way you can purchase an AD&D policy is by adding it as a rider to a full life insurance policy. This allows your beneficiaries to receive an extra amount of money on top of your normal policy.
Pros and Cons
Like any other financial choice, there are pros and cons to purchasing an accidental death and dismemberment policy. The pros of an AD&D policy include:
- Since there is no medical exam, if you are between 18 and 70, you should receive coverage. Even if you have a preexisting condition.
- You can receive AD&D coverage quickly, usually within a few days.
The cons of an AD&D policy include:
- The coverage is limited. There are only very specific circumstances under which your beneficiaries will receive coverage.
- Even though coverage is comparatively cheap, its value is low. This is due to the fact that your benefit is unlikely to be paid out.
Purchasing Accidental Death and Dismemberment Insurance
If you are interested in purchasing an AD&D policy, you can either contact your employer to see if they offer coverage. Or you can contact an insurance agent who can help you find a policy that fits your needs.
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