Accidental death and dismemberment insurance (AD&D) is the only type of health insurance that includes a death benefit. It is a relatively inexpensive way to enhance coverage but is not a substitute for life insurance. AD&D pays a lump-sum benefit only in the event of accidental death or dismemberment and does not offer any cash value like a whole life policy.
The principal sum is the full benefit amount paid for accidental death or for severe dismemberment, such as the loss of both limbs or total blindness. Loss of two limbs, both eyes, or life typically results in 100% of the principal sum. The capital sum is the amount paid for dismemberment, usually a percentage of the principal sum. For example, losing one arm or one eye may result in 50%, while partial losses like a thumb and index finger may result in 25% or less, depending on the policy.
The principal sum paid on an AD&D policy is paid in the same manner as a life insurance death benefit. A beneficiary must be designated and the death benefit can be paid under any of the settlement options common to life insurance benefits.
AD&D policies often include a “physical examination and autopsy” provision, which allows the insurer to request an autopsy in the event of a death claim, as long as it is not prohibited by law. The cost is typically covered by the insurer.
The primary exclusions of these policies are:
AD&D policies also typically exclude losses resulting from war, suicide, illness, or injuries sustained while engaging in hazardous activities or under the influence of substances, even if the person is not visibly impaired.
A common variation of AD&D that is sold in airport terminals and by travel agents is called travel accident insurance. This policy will cover you while flying on a regularly scheduled commercial flight, but not on private planes. Coverage is written to cover one specific trip only.
Accidental Death & Dismemberment (AD&D) Insurance
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