Accidental death and dismemberment insurance (AD&D) pays your beneficiary if you unintentionally pass away, lose a limb, or use thereof. Loss of vision, speech, and hearing are also commonly covered under this insurance.
You may purchase AD&D insurance by itself or as a rider. However, this insurance is typically used to supplement another life or health insurance policy. It is not intended to be used as primary life insurance because there are many limitations on which types of events qualify for payment.
In fact, there are quite a few misconceptions you should consider before purchasing accidental death and dismemberment insurance.
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Myth #1: AD&D Covers Any Kind of Death or Injury
AD&D insurance will cover accidental death or injuries, but it will not cover self-inflicted injuries or overdose. Heart disease and cancer are the top two leading causes of death, but unfortunately, these would not be covered under an AD&D policy because they are considered natural causes of death.
The dismemberment portion of this insurance usually pays a percentage of the death benefit upon loss or injury to certain body parts. The payout varies depending on the body part affected and the severity of the injury. For example, loss of hearing may pay 50%, whereas loss of vision will pay 100%.
Myth #2: AD&D Is a Replacement for Life Insurance
The main reason why you should not depend solely on AD&D insurance is because it restricts payouts for injury or death to accidental circumstances, which are less likely to occur. However, it is a helpful tool to complement a traditional life insurance policy.
As mentioned earlier, the top two causes of death are heart disease and cancer, which are covered by a traditional life insurance policy. The chances of dying in a plane crash are much lower, but it would be covered under an AD&D policy. Together, these policies could provide extensive coverage for all the what-ifs life throws your way.
Myth #3: All AD&D Policies Are the Same
Just like health insurance, not all AD&D plans are made equal. Terms of coverage, exclusions, and payout benefits can vary depending on the policy provider. For example, one insurer may pay for the loss of a finger, and another carrier may not.
It’s important to research and shop around for the coverage that fits your needs. Insurance is not a one-size-fits-all deal, so consulting an insurance broker with access to multiple plans and carriers may be your best bet. Before enrolling, review policy terms and ask questions to better understand the plan.
Myth #4: If You’re Injured, AD&D Will Cover Your Medical Bills
Medical insurance is used to lessen out-of-pocket expenses by paying your healthcare provider directly. Insurance carriers and providers coordinate benefits by setting up pre-negotiated payments for certain services.
However, this is not the case for AD&D insurance because it’s designed to pay the beneficiary directly in the event of a covered injury or death. Therefore, if you are in an accident and need immediate medical attention, keep in mind that you will still be responsible for copays, coinsurance, and deductibles. Having a separate health plan is crucial because otherwise, you would pay these costs out of pocket.
Myth #5: AD&D Covers Deaths and Injuries from All Recreational Activities
A wide range of “high-risk” recreational activities are excluded from AD&D policies, such as bungee jumping, skydiving, and drag racing. If your policy does not cover death or injury that occurs during a high-risk activity, then a payout will not be delivered as a result.
Again, each AD&D policy has different terms and exclusions, so it is imperative to understand your plan’s benefits if you enjoy one of these risky hobbies. Additionally, if you have a high-risk profession, such as a firefighter, police officer, or construction worker, you may not qualify for accidental death and dismemberment insurance at all.
All in All
Accidental death and dismemberment insurance is a great way to supplement your existing life and health insurance policies by paying a lump sum after a qualified death or injury.
For the most part, if the death or injury is not a result of an accident, the policy will not pay. Furthermore, AD&D will only pay the beneficiary directly, not your medical providers, so be sure you have adequate medical coverage to cover your health costs while injured.
The most important thing you can do is educate yourself on your policy’s terms and exclusions to avoid confusion down the road.