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Life Insurance vs. AD&D: What’s the Difference?
By Cassidy Horton MONEY RESEARCH COLLECTIVE
Both life and accidental death and dismemberment insurance offer you and your loved ones financial protection. However, they do so in different situations and, often, under different circumstances. So which is better for your situation? Here’s a look at how both policy types work, their pros and cons, and when it makes sense to get one or the other.
Table of contents
- What is life insurance?
- What is accidental death and dismemberment insurance?
- How do AD&D and life insurance work?
- What do AD&D and life insurance cover?
- What is the difference between AD&D insurance and life insurance?
- Can you combine AD&D insurance with any other type of life insurance?
- Is accidental death and dismemberment insurance necessary?
- How can you get AD&D coverage or life insurance?
- Accidental death and dismemberment vs. life insurance FAQs
What is life insurance?
Life insurance is a type of insurance policy that requires the policyholder to pay a monthly or annual premium in return for a death benefit. If the policy is in effect when the policyholder passes away, the death benefit is paid to their chosen beneficiary or beneficiaries.
Pros and cons
What is accidental death and dismemberment insurance?
Accidental death and dismemberment insurance (AD&D) is a type of life insurance policy that pays benefits if you die or are dismembered due to a covered accident. Policies outline the specific types of accidents and injuries that are covered.
Pros and cons
How do AD&D and life insurance work?
Life insurance and AD&D differ in how they work and the benefits they offer. Here’s a basic overview of each.
How life insurance works
To get life insurance, you’ll need to apply with an insurance carrier. The insurer will assess your lifestyle and current state of health to determine the risk you present. In some cases, you’ll need to undergo a medical exam. If approved, you’ll be offered various policy types and options.
Once you choose a plan, you’ll pay a premium (monthly or annually) to get coverage. As long as you pay your premium, your coverage will remain in effect according to the terms of your policy. If you have coverage at the time of your death and the circumstances of your death are covered by the policy, your chosen beneficiaries will receive the plan’s death benefit. They can then spend that money however they choose.
Beyond the basics, how your specific life insurance policy works will depend on the type of life insurance you choose. Term life insurance policies are the most affordable but only cover you for a set period—such as 10, 20, or 30 years. Permanent policies, like universal or whole life insurance, cover you for the rest of your life as long as you make your premium payments.
Permanent policies also typically come with a cash value component that builds up over time. You can withdraw or borrow against your cash value during your life, but if there’s an outstanding amount owed when you die, it will be subtracted from the death benefit your beneficiary receives. While permanent policies offer more coverage and benefits, they’re also considerably more expensive.
How AD&D works
AD&D insurance requires you to pay a premium (monthly or annually) in exchange for two types of coverage. The first coverage type provides a lump sum death benefit to your chosen beneficiary if you die due to a covered accident. The second is dismemberment coverage which pays a benefit to you if you lose a body part or the use of it as the result of a covered accident.
The benefit amount you receive for dismemberment will be dependent on how many limbs or functions you lose and the severity of your injuries. It’s often calculated as a percentage of your total coverage amount, such as 25% or 50%. Each policy outlines the types of accidents and injuries that are covered and how the payouts work.
You can purchase AD&D as a stand-alone policy or as a rider on a life insurance policy. Additionally, many employers offer it as an employee benefit. It’s typically much easier to get approved for than a standard life insurance policy and it doesn’t usually require a medical exam.
What do AD&D and life insurance cover?
Here’s a closer look at life insurance coverage versus AD&D coverage
Life insurance coverage
Life insurance coverage varies from one insurer to the next, but here’s a look at the causes of death that are most frequently covered.
Covered causes of death
- Natural causes, such as a heart attack
- Accidents, such as a car crash
- Suicide (with certain limitations and restrictions)
- Murder
Not covered causes of death
- Criminal activity
- High-risk hobbies such as skydiving
- War or acts of terrorism
- Accidents that occur while the insured is under the influence of drugs or alcohol
- When the beneficiary is closely tied to your murder
AD&D coverage
Policies will vary from one insurer to the next, but here are some examples of what AD&D coverage often includes.
Covered
Accident types:
- Firearm accidents
- Falls
- Car accidents
- Workplace incidents
- Public transportation accidents
- Drowning
- Fire-related incidents
Accidental injuries:
- Loss of vision
- Loss of movement
- Loss of fingers, hands, or feet
- Loss of hearing
- Loss of speech
Not covered
Causes of death:
- Suicide
- Certain high-risk recreational activities like skydiving or bungee jumping
- Overdose
- Accidents involving drugs or alcohol
- Illness
- Natural causes
It’s also worth noting that for deaths or injuries to be covered, they often must occur within a certain amount of time after the accident that caused them—such as 365 days. Policies will define any applicable time limits.
What is the difference between AD&D insurance and life insurance?
When it comes to insurance coverage at the time of death, life insurance provides more comprehensive coverage than AD&D policies do. It covers death by natural causes, suicide, accidents, and more. AD&D policies only cover deaths caused by certain accidents. However, life insurance doesn’t offer coverage for dismemberment or loss-of-use injuries, while AD&D insurance does.
Another big difference is found when looking into the amount of coverage you can get with each type of policy. Life insurance often offers much larger maximum death benefits. For example, Winn Companies offers death benefits equal to two times a policyholder’s annual earnings. With basic term life insurance, the maximum limit is $1 million. Meanwhile, with AD&D coverage, the max limit is just $250,000. That said, the lower coverage limits mean that AD&D coverage is also generally much cheaper than standard life insurance. When deciding between the two, you should consider how much life insurance coverage you need and what circumstances you’d like covered.
Can you combine AD&D insurance with any other type of life insurance?
Many insurers offer AD&D policies in the form of insurance riders that can be added to your life insurance policy. By having both policy types in place, you’ll have comprehensive coverage for your death as well as for dismemberment injuries that result from an accident.
Is Accidental Death and Dismemberment insurance necessary?
Whether AD&D insurance is necessary for you will depend on your situation. The coverage can offer benefits for anyone. After all, you never know what kind of accident could happen to you. However, those at higher risk of sustaining injuries from covered accidents will benefit the most.
For example, if you’re a mechanic, logger, or construction worker, you’re more likely to have an accident and become dismembered than a clerk who works at a desk all day. Additionally, if you travel a lot in your free time, you’re also more likely to be involved in an accident on the road or while using public transportation. In these cases, the benefits of an AD&D policy could be seen as more valuable.
How can you get AD&D coverage or life insurance?
Life insurance and AD&D coverage are provided by many different insurance providers. You can shop around with various insurers, compare their coverage options, and get quotes to find the best deal for your situation.
Additionally, if you’re employed, your employer may offer AD&D as part of your benefits package. According to the Society for Human Resource Management, more than 80% of employers offer AD&D policies to their employees.
Accidental death and dismemberment vs. life insurance FAQs
Here are answers to a few frequently asked questions about AD&D policies.
Summary of our guide to AD&D vs. life insurance
- AD&D is an insurance policy, often a supplemental rider or employee benefit, that provides financial protection in the event of a death or dismemberment injury that results from a covered accident.
- AD&D covers accidents involving fire, drowning, public transport, vehicles, falls, firearms, and more.
- Life insurance is a primary insurance policy that pays a death benefit to the beneficiary of a policyholder in a wide range of circumstances, including when death occurs due to natural causes.
- While life insurance offers more comprehensive death benefit coverage and can offer additional perks like cash value components, it doesn’t cover the costs associated with dismemberment injuries from accidents.
- The benefits of life insurance will also depend on whether you choose term vs whole insurance.
- If you’d like AD&D coverage, you can contact your insurer to ask about adding it to your life insurance policy, look into a standalone policy, or see if your employer offers it.
Cassidy Horton is a finance writer based in Seattle, Washington. With an MBA and a bachelor's in public relations, her work has been published over a thousand times by The Balance, Finder.com, Money Under 30, Clever Girl Finance, and many more. Cassidy is a self-confessed money nerd who’s passionate about helping people find financial freedom. Oh, and she really loves cats.