Accidental Death & Dismemberment: A Substitute for Life Insurance?

You might be covered under an Accidental Death & Dismemberment (AD&D) policy as a fringe benefit through your employer or as a benefit of joining a professional association. Now that you are covered by an insurance policy in case of accidental death, you might be wondering if you really need to have a separate life insurance policy as well. After all, life insurance isn’t cheap, especially if you buy a whole life policy to take advantage of the investment it offers over term life. It’s crucial to understand what an AD&D policy covers and what it doesn’t. Once you understand the limitations of AD&D coverage, you are likely to conclude that a separate life insurance policy is indeed necessary to protect your family.

What does AD&D insurance do?

As the name implies, AD&D only pays out in the event of accidental death or loss of limb (or other serious injury such as paralysis). Since death can come about in other ways (illness or disease, for instance), AD&D insurance is better viewed as a supplement to a life insurance policy, rather than a replacement. Indeed, AD&D coverage is purchased as a supplement or rider to a term policy more often than it is sold as a standalone policy. As an example, if you have a term life policy covering $300,000 in case of death and added an AD&D rider of $100,000, your beneficiary would receive $400,000 in case of accidental death or $300,000 for death caused by other factors. According to the CDC, accidental deaths are the third leading cause of death in the United States after heart disease and cancer. Accidental death is a distant third, to be sure, but it still outranks other non-accidental causes such as stroke, Alzheimer’s, chronic lung diseases and diabetes.

Why do you need life insurance anyway?

Not everyone needs a million-dollar whole life policy, but some amount of life insurance is likely to prove valuable to the family members left behind. Evaluate your entire financial situation, including savings and debts and future needs, to determine what type of life insurance your family would benefit most from and how much coverage you should purchase. Some issues to think about include:
Does your spouse work? Do you have savings? Will there be enough income for the family to live on comfortably after you are gone? Life insurance can be used to make up for the loss of income when a wage earner dies.
Do you own a home that you are currently paying a mortgage on? The house is likely the family’s most valuable asset, and keeping up with mortgage payments is paramount. Life insurance proceeds can go toward meeting the monthly mortgage or even paying off the house altogether.
Have you pre-planned for funeral and burial services, or will this be an additional cost the family will need to face? The average funeral costs anywhere from $7,000 to $10,000, depending on where you live. Once you add in the average cost of end-of-life medical expenses, these combined costs jump to $20,000 or $30,000. Mind you, these are averages, so plenty of people get hit with much higher costs. Even if you don’t have a house to protect or income to replace, having enough life insurance to safely cover final expenses can be a godsend during a troubling, anguishing time in the family.

AD&D: To Buy or Not to Buy?

Since AD&D insurance only covers limited instances, it is considerably cheaper than life insurance. Also, AD&D can cover a range of non-fatal, disabling conditions with different payout levels, whereas life insurance only covers death. AD&D can, therefore, be a valuable addition to your insurance portfolio, especially when it is provided through an employer or professional association at little or no cost to you. If buying AD&D insurance on your own, you’ll want to weigh the cost versus benefit and also ensure you are buying a policy from a reputable company that has a history of paying valid claims. If you do file a claim and it gets turned down, pick up the phone and call an experienced and successful insurance law firm in your state. They’ll most likely evaluate your case for free and advance the costs of getting your claim paid, so it won’t cost you anything upfront to get legal help to pursue your claim.