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Accidental Death Insurance


We regularly receive questions related to life insurance from people who are looking to buy life insurance coverage for themselves and for their family members.

A fair number of these questions are related to accidental death and the coverage needed for the same.

In this guide, we have answered the most commonly asked questions on accidental death insurance. The information given below can help you understand how accidental death insurance works and decide whether or not you need it.

What is Accidental Death Insurance?

Accidental death insurance, also referred to as accidental death and dismemberment (AD&D) insurance, is a type of life insurance coverage that pays you (if you are disabled as a result of an accident) or your family (if you die in an accident).

If you are partially disabled as a result of an accident, you will be paid a specific percentage of the death benefit amount, depending on your policy’s terms and conditions. Partial disability, in this context, generally means the loss of limb, vision, speech, hearing capacity, or mobility.

Some insurers, however, tend to pay you the full death benefit amount if you become fully disabled or experience the loss of a major bodily function as a result of the accident.

If you, on the other hand, die in an accident, your beneficiary will be paid the entire death benefit amount.

It should be noted that not all accidental death policies have the dismemberment or disability clause built into them. If it is a stand-alone accidental death policy, the death benefit amount will be paid out to your family only in the event of your death.

If you survive the accident but suffer from a permanent disability as a result, you will not receive any payout from the insurer. So, before applying for a policy, you should find out whether it is a stand-alone accidental death policy or accidental death and dismemberment policy.

What is Considered Accidental Death?

Any death which is caused as a result of an accident is considered an accidental death. The most common reason behind an accident death is motor vehicle accidents.

If you die as a result of a crash or a collision involving a motor vehicle, it is considered an accidental death. Common examples include:

Apart from this, if you die in an accident involving a bus, train, or airplane, it is also considered an accidental death.

Other examples of accidental deaths include:

What is Not Considered Accidental Death?

The following deaths are generally excluded from AD&D coverage.

Is the Payout from an Accidental Death Insurance Policy Taxable?

No, life insurance payouts are not taxable. Whether it is a disability payout (a portion of your policy’s death benefit, which is paid out to you) or an accidental death payout (the entire death benefit amount, which is paid out to your family), there is no need to pay state or federal taxes.

Is a Medical Exam Necessary to Qualify for AD&D Insurance?

No. You do not have to undergo a life insurance health exam, submit blood and urine samples, or answer a bunch of health-related questions in order to qualify for an accidental death insurance policy.

An AD&D policy, as mentioned above, is designed to pay you – if you become partially or fully disabled as a result of an accident – or pay your family – if you die as a result of an accident. The cause of disability or death is entirely accidental.

So, the insurance provider is generally not concerned about your age, health condition, lifestyle, family medical history, and other factors that determine your insurability.

What Does an Accidental Death Insurance Policy Cost?

The cost of an AD&D policy primarily depends on the coverage amount you choose. If you are a 35-year-old man, a $100,000 policy is likely to cost you only around $10 a month. It should be noted that most insurers place a cap on the amount of AD&D coverage you can buy. The upper limit is set at $500,000 in most cases.

Who is it Needed For?

If you are between the ages of 18 and 25, you are at a greater risk of being involved in an accident compared to people from other age groups.

Even if you do not have a family of your own, your death could have a significant financial impact on your parents, especially if they have co-signed your private student loan.

Similarly, the risk of slips, trips, and falls is disproportionately high among people over the age of 65. If you are in this age group, it might be a salient idea for you to buy AD&D insurance which covers partial and full disabilities caused by slips and falls.

If you are between the ages of 25 and 55, you still might need AD&D insurance, as the risk of accidental death cannot ever be ruled out – irrespective of the safety measures you take in your daily life.

Apart from your age, your occupation is also a key factor you need to consider while deciding whether or not you need AD&D insurance.

If you work with heavy machinery or if your occupation requires you to drive long distances on a regular basis, you are at a higher risk of being involved in an accident compared to the average person. So, you definitely need AD&D insurance in such cases.

Can an AD&D Policy Replace a Term Life Insurance Policy?

This is a critical question that deserves a detailed answer.

One of the key things you need to know about an AD&D policy is that it should not be considered a replacement for a term life insurance policy under any circumstances.

A term life policy provides your family with a lump-sum payment in the event of your death – whether you die of a natural cause or in an accident. An AD&D policy, on the other hand, only pays your family if you die in an accident.

For people over the age of 35, the risk of dying in an accident is actually lower than the risk of dying of a natural cause in most cases. So, it does not make any sense for you to choose an AD&D policy over a term life policy.

You are generally required to go through an exam or answer a number of health-related questions in order to qualify for a fully underwritten term life policy. You have no such obligations with an AD&D policy.

So, even those who cannot qualify for a term life policy due to their health condition can easily qualify for an accidental death insurance policy.

The quick and hassle-free approval process is one of the reasons why some people – especially those with pre-existing health problems – are tempted to choose an AD&D policy over a term life policy.

It is, however, a bad idea as accidental death insurance does not protect against the risk of loss of income caused by your death due to natural causes.

So, if you were to pass away due to a heart attack or stroke your family will not receive any money from the insurer.

Simply put, an AD&D policy can only complement a term life policy, but can never replace it.

Is Accidental Death Insurance Worth Buying?

An AD&D policy is extremely affordable and can be bought without proving your insurability. It can complement your term life policy and provide an additional payout if you happen to die in an accident.

The low cost of the policy means you are not likely to spend too much of your money even if you keep the policy in force for a long time. For example, a $100,000 policy is only likely to cost you around $120 per year.

Even if you keep it in force for 30 years, it will only cost you $3,600, which is less than what you are likely to spend on cable TV or Netflix during the same time period.

Other than buying a separate accidental death insurance policy, you also have the option of adding an accidental death benefit rider to your term life policy. It only costs you a few dollars more (other than what you pay for your term life policy), but can double your death benefit amount in the event of your accidental death.

For example, let us assume that you own a $250,000 term life policy with a $250,000 accidental death benefit rider.

Now, if you were to die of a natural cause, your family will only receive $250,000, which is the payout from your term life policy. If, on the other hand, you die in an accident, your family will receive a total of $500,000 ($250,000 from the term life policy and $250,000 from the accidental death benefit rider).