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Accidental Death and Dismemberment Insurance
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Accidental death and dismemberment insurance (AD&D) is unique in that it is the only type of health insurance with a death benefit.
While AD&D does represent a relatively inexpensive means of enhancing one's insurance program, it is not a substitute for life insurance.
AD&D pays a lump sum benefit only in the event of accidental death or dismemberment.
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AD&D does not offer any of the cash value features of a whole life policy. A lump sum payment is made in the event of death or dismemberment by accidental means.
Dismemberment occurs when the insured loses a foot above the ankle, hand above the wrist, or total sight in both eyes as a result of an accident.
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The death benefit payable under an AD&D policy is called the principal sum.
In a typical AD&D policy, the dismemberment benefit is 50% of the principal sum, referred to as the capital sum. Most policies will also pay the principal sum in the event of a severe dismemberment (loss of 2 limbs or total blindness.) 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.
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The primary exclusions of these policies are:
1. Accidental death or dismemberment sustained while committing a crime.
2. Being under the influence of alcohol or narcotics at the time of the accidental death or dismemberment.
3. Anything covered by workers compensation. In addition, AD&D policies do not cover loss of digits, (fingers and toes). Since coverage is very limited, premiums are low.
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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.
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Continue to the Next Module!
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