Life insurance is one key element for estate planning, but may not cover those who perish due to an accident. That is where accidental death and dismemberment insurance kicks in.
Accidental death and dismemberment insurance (AD&D insurance) is a type of policy that would specifically pay out to beneficiaries if the policyholder died because of a calamity. Like with any type of insurance coverage, there are pros and cons to selecting an accidental death and dismemberment insurance policy:
Pros of Accidental Death Insurance
- Pays set amount for accidental death and dismemberment
- Provides financial assistance to dependents of a financial provider
- Spans both fatalities and critical injuries resulting in loss of vision, hearing, limbs or speech
- Premium costs are inexpensive
- Can be purchased as either a rider or a completely separate policy
Cons of Accidental Death Insurance
- Extremely restrictive coverage, terms for pay out are finite
- Excludes accidental deaths caused by drug overdose, surgery, bacterial infection, hernias and illness (both mental and physical)
- Death directly related to an accident must be proven
- Will not apply if accidental death is caused by high risk activities like car racing, parachuting, hand gliding and other extreme sports
- When it pays out for dismemberment it pays by "members" lost (IE, if you lose one eye, you would receive compensation for that injury, if you loss an eye and hand, you would receive more)
Accidental death and dismemberment insurance may be good idea if you work in a specific industry where accidents causing dismemberment is common. Common industries for those industries include farming, coal mining and factory work.
In those cases, conventional life insurance would provide very little assistance. But for the average Joe or Jane, money invested in AD&D would be better spent toward a broader policy such as standard life insurance, long term care or even burial insurance.
