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Understanding Your AD&D Coverage

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Knowing What Your Insurance Covers

Share current LOB: PersonalBanking

Most people buy insurance, including AD&D, to handle the worst-case scenarios. Maybe you have, or are considering purchasing, AD&D coverage but don't know exactly what it is. Read on to find out if this type of insurance is right for you and your family.

What Is It?

AD&D stands for accidental death and dismemberment. Still not sure what that means? Accidental death is a death that results within three months of an accident. The death must be directly connected to the accident.

Dismemberment can involve anything from the loss of a limb to the loss of a capacity, such as speech or sight. The amount of money someone receives in cases of dismemberment depends on the individual policy. Many, however, will only pay half of the amount if only one limb is lost or if hearing is damaged in only one ear. Full payment may require the total loss of hearing or the loss of at least two limbs.

Is It Necessary?

Do you or a family member work in a dangerous job like heavy construction? People in risky or dangerous occupations often purchase AD&D insurance. Many employers also offer this kind of coverage to their employees who travel frequently. It may be an inexpensive way to provide extra insurance coverage.

Are you a thrill seeker who regularly participates in sports considered "risky", like skydiving? An insurance company may reject you outright because of your participation in extreme sports. An AD&D policy may be the only way you can get insurance coverage.

What if you don't fit any of these categories? Odds are your normal life insurance policy will cover almost everything that an AD&D policy would; it may even cover more. As mentioned earlier, an AD&D policy is often less expensive than a traditional life insurance policy, but it also covers less. You and your family may be taking a financial risk if you opt to only go with an AD&D plan.

What Are the Pros and Cons?

So what are the advantages of having an additional AD&D policy? First, it may be a low cost way to get a large payout in case of death or loss of a body part. This money may help you and your family rebuild your life and not have to struggle financially. Second, a normal life insurance policy may not give you any money if you lose a limb. You may only get money from that type of policy if you die from an accident or from natural causes.

If you need to modify your home as a result of your injury, your AD&D coverage may help pay for those renovations. Many plans also allow you to cover your spouse and children. This additional coverage is usually very inexpensive.

There are limitations to what AD&D will cover, however. Any injury or death that is a result of self-injury is not covered. Likewise, if you or a family member is disabled or killed during war, the AD&D policy will not apply. Other areas that aren't covered include any death or injury that results from surgery or any mental or physical illness.

Types of AD&D

There are four kinds of AD&D policies. Many group life insurance plans include the basic AD&D policy. In this case, the group life benefit amount is the same as the AD&D death benefit amount.

You may also get AD&D coverage as a supplement or it may be offered as a voluntarily option through your employer. If you choose this route, you may elect coverage and the premium would generally be taken out as a deduction from your paycheck. A third option also comes via your employer. Your company may offer coverage for employees that travel, and it may pick up the premiums.

The final type of AD&D coverage includes dependents such as your spouse or children. When offered through an employer, the value of these plans base their payout on a percentage of the employee's salary. Coverage is voluntary and not automatic.

You may want to consult a financial advisor or your employer's human resources department if you have any outstanding questions about your AD&D coverage.

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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