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When will your AD&D policy actually pay?

As the name illustrates, AD&D (Accidental Death and Dismemberment) policies provide benefits in the case of an accidental death or dismemberment of an insured. Many employees of high-risk, dangerous occupations, such as construction workers, purchase AD&D plans due to their lower rates when compared to regular life insurance policies. However, it is important to understand the differences between Life and AD&D policies, and be aware of what is actually covered under your AD&D policy.

AD&D is not Life Insurance

Many people purchase AD&D insurance in addition to life insurance or health insurance coverage. They can receive these benefits as part of an employee benefits package offered by their employer, or coverage may be provided by a credit card company or bank. However, it is important to remember that AD&D is not life insurance. Life insurance pays a lump sum benefit to the beneficiary if the insured dies. AD&D insurance will only pay the full benefit if the insured dies due to an accident and will pay either the full or partial benefit if one or more of your body parts becomes dismembered.

There are many exclusions to AD&D policies

Insurance companies who offer AD&D are able to sell their policies for such low premium rates because a majority of their insured customers will never file a claim, and those that do may not be approved for benefits. There are many exclusions to the types of claims that will be approved for benefits. Death caused by national causes, suicide, or by participation in high-risk activities such as sky diving, war, and even surgery are not covered under most AD&D policies. Although the list of exclusions will vary from policy to policy, most AD&D policies do not include death caused by overdosing on drugs, injuries one intentionally inflicted upon them, and driving while intoxicated.

AD&D policies will cover full or partial benefits due to the loss of a limb, such as a hand or leg, as well as loss of eyesight, speech, or hearing. It is important to check your policy and understand what qualifies as a covered “dismemberment” and what portion of your benefit you will receive for that loss.

Insurance company will look for loopholes to deny benefits

The most common way insurance companies deny payment of AD&D benefits is by claiming the cause of death of the insured was not an accident.  As you get older, you are more likely to die due to either an illness or due to natural causes.  However, the National Center for Health Statistics showed that death due to unintentional injuries and accidents was the fifth leading cause of death in 2009 (the most recent data available).  Remarkably, the age group with the largest portion of the 118,021 total deaths caused by accidents in 2009 was the 45 to 54 year olds (19,974 deaths).

Another way insurance companies get out of paying benefits on AD&D policies is by setting a limit to the time it takes you to show lose after an accident.  Most AD&D policies state that death or loss of a limb must occur within 3 months after the accident that caused it in order to receive benefits.  Death must also be a direct result of the injuries sustained in the accident.

Understand your policy and what is covered

As with every other type of insurance policy, it is very important to understand what is covered under your specific policy and what is not.  Every insurance policy is different – different insurance companies will cover various accidents while others will not and each company has their own procedures and ways of processing claims and appeals.  It will only hurt your claim if you are not familiar what the exclusions and requirements outlined in your policy if it ever comes time for you to file a claim for your benefits.
If you are not a risk taker, consider purchasing life insurance as well.  The odds are not in your favor to receive benefits under an AD&D policy, meaning you are more likely to die due to natural causes or an illness.  Speak with your financial adviser to determine the type of coverage that will provide you with the best financial stability in case of these events.

Source:  2009 Death Statistics – National Center for Health Statistics; The Basics of Accidental Death and Dismemberment Insurance –; What is AD&D Insurance – eHow