26.3 Accidental Death and Dismemberment (AD&D)
Key Takeaways
AD&D pays only for accidental death or specific losses, not illness.
Benefits follow a schedule of losses (capital sum) with partial payouts.
Coverage can be individual, group, or attached as a rider to life insurance.
Common exclusions include sickness, war, suicide, and hazardous activities.
AD&D is not a substitute for life insurance due to limited causes of loss.
Double indemnity riders often provide AD&D benefits within life policies.
Accidental Death and Dismemberment (AD&D) insurance provides benefits if the insured dies or suffers specific serious injuries due to an accident. AD&D is often offered as a rider to life insurance or as a standalone voluntary benefit.
How AD&D Works
AD&D pays benefits only for losses caused by accidents, not illness or natural causes. The policy defines what qualifies as a covered accident and specifies payment amounts for various losses.
Key Benefit Terms
| Term | Definition |
|---|---|
| Principal Sum | Full benefit paid for accidental death or most severe losses (e.g., loss of two limbs) |
| Capital Sum | Benefit paid for specific losses (often a percentage of principal sum) |
| Covered Accident | An unintended, unforeseen event that directly causes injury or death |
Schedule of Benefits (Capital Sum)
AD&D policies include a schedule of benefits that specifies the percentage of the principal sum paid for each type of loss:
| Loss | Typical Benefit |
|---|---|
| Loss of Life | 100% of Principal Sum |
| Loss of Both Hands or Both Feet | 100% of Principal Sum |
| Loss of Sight in Both Eyes | 100% of Principal Sum |
| Loss of One Hand and One Foot | 100% of Principal Sum |
| Loss of One Hand/Foot and Sight in One Eye | 100% of Principal Sum |
| Loss of Speech and Hearing | 100% of Principal Sum |
| Loss of One Hand or One Foot | 50% of Principal Sum |
| Loss of Sight in One Eye | 50% of Principal Sum |
| Loss of Speech or Hearing | 50% of Principal Sum |
| Loss of Thumb and Index Finger (same hand) | 25% of Principal Sum |
Definition of Loss: "Loss" typically means complete severance (amputation) or total, irrecoverable loss of function.
Types of AD&D Coverage
Voluntary AD&D
- Purchased by individuals or offered as optional workplace benefit
- Premiums typically low ($5-$20/month for $100,000+ coverage)
- Can be portable (continue coverage after leaving employer)
Group AD&D
- Employer-sponsored coverage
- Often included as part of group life insurance
- Coverage typically 1-3x annual salary
Travel Accident Insurance
- Covers accidental death/dismemberment while traveling
- May be included in credit cards or purchased separately
- Common coverage: airplane accidents, travel-related accidents
Common AD&D Exclusions
AD&D policies do NOT pay for losses caused by:
| Exclusion | Example |
|---|---|
| Illness or Disease | Heart attack, stroke, cancer |
| Suicide or Self-Inflicted Injury | Intentional self-harm |
| War or Military Action | Combat injuries |
| Participation in a Crime | Injury while committing a felony |
| Intoxication | Accidents while legally intoxicated |
| Drug Use | Accidents while under influence of non-prescribed drugs |
| High-Risk Activities | Skydiving, bungee jumping (unless covered by rider) |
| Pre-Existing Conditions | Injuries related to prior conditions |
AD&D vs. Life Insurance
| Feature | AD&D | Life Insurance |
|---|---|---|
| Death Benefit | Accidental death only | Any cause of death |
| Dismemberment Benefit | Yes | No |
| Premium Cost | Much lower | Higher |
| Underwriting | Minimal or none | Medical underwriting |
| Claim Frequency | Low (most deaths aren't accidental) | Higher |
Exam Tip: AD&D should supplement life insurance, not replace it. Only about 5-6% of deaths are accidental, so most people will never collect AD&D benefits.
Common Riders
| Rider | Description |
|---|---|
| Seatbelt/Airbag | Additional benefit if wearing seatbelt or airbag deploys |
| Common Carrier | Additional benefit for accidents on planes, trains, buses |
| Education Benefit | Pays for dependent children's education if insured dies |
| Exposure/Disappearance | Covers death from exposure or if body never found |
| Coma Benefit | Monthly payments if accident causes extended coma |
| Rehabilitation Benefit | Covers rehab/retraining after dismemberment |
Key Takeaways
- AD&D pays only for accidental death or specific losses, not illness.
- Benefits follow a schedule of losses (capital sum) with partial payouts.
- Coverage can be individual, group, or attached as a rider to life insurance.
- Common exclusions include sickness, war, suicide, and hazardous activities.
- AD&D is not a substitute for life insurance due to limited causes of loss.
- Double indemnity riders often provide AD&D benefits within life policies.
What is the "principal sum" in an AD&D policy?
The monthly premium amount
The full benefit amount paid for accidental death or the most severe losses
The deductible that must be paid before benefits begin
The cash value that builds up over time
Which of the following would typically be EXCLUDED from AD&D coverage?
Death in an automobile accident
Loss of a limb in a workplace accident
Death from a heart attack
Death in an accidental fall
According to a typical AD&D schedule of benefits, what percentage of the principal sum is paid for loss of one hand?
25% of Principal Sum
50% of Principal Sum
75% of Principal Sum
100% of Principal Sum
Sections you finish are checked off in the contents.