What Does Accidental Death & Dismemberment (AD&D) Mean?

Accidental Death & Dismemberment (AD&D) insurance is a specific type of coverage designed to provide financial protection in the event of an unexpected and severe accident. This insurance offers benefits if an insured individual dies due to an accident or suffers certain serious injuries that result in the loss of body parts or functions.

Core Definitions of AD&D

Accidental Death, within the context of AD&D insurance, refers to a death that is caused directly by external, violent, and unforeseen means. This definition typically excludes deaths resulting from illness, natural causes, or self-inflicted actions. For instance, fatalities from motor vehicle collisions, unexpected falls, drowning incidents, or fires are generally considered accidental under these policies. A death certificate that lists the manner of death as accidental often supports such a claim.

Dismemberment, for AD&D purposes, signifies the loss or loss of use of specific body parts or functions. Policies clearly outline what constitutes a covered loss, such as the severance of a limb at or above a major joint like the wrist or ankle. It also extends to the permanent loss of sight in one or both eyes, hearing, or speech. Some policies may also cover paralysis, distinguishing between conditions like quadriplegia (loss of use of all four limbs) and paraplegia (loss of use of the lower body).

Covered Incidents and Limitations

AD&D insurance policies typically cover a range of unforeseen events that directly lead to severe injury or death. Common examples of incidents that often result in a payout include motor vehicle accidents, significant falls, industrial accidents involving machinery, and severe burns. Events such as accidental poisoning or drowning are also frequently covered, provided they meet the policy’s definition of an accident.

However, AD&D policies contain specific limitations and exclusions that define when benefits will not be paid. Deaths or injuries resulting from illness, natural causes, or medical conditions are almost universally excluded, as are those from suicide or self-inflicted harm. Incidents occurring during illegal activities, due to drug or alcohol overdose, or during acts of war are also commonly not covered. Participation in certain dangerous or extreme sports may be excluded unless specific additional coverage is purchased.

Claiming Benefits and Beneficiaries

Benefit payouts from an AD&D policy are typically made as a lump sum. In the case of accidental death, the policy’s full face value is usually paid to the designated beneficiaries. For dismemberment, the payout is a percentage of the policy’s face value, which varies depending on the severity and type of loss. For example, the loss of two limbs or complete sight might result in 100% of the benefit, while the loss of one limb or sight in one eye could be 25% to 50%.

Beneficiaries are individuals or entities legally designated by the policyholder to receive the death benefit. Policyholders can name primary beneficiaries who are first in line to receive funds, and contingent beneficiaries who receive benefits if the primary beneficiaries are unable to. The lump sum payout is generally not subject to income tax for the beneficiaries, though any interest earned on the payout might be.

When a claim needs to be made, the insurer must be notified promptly, often within a specified timeframe, such as 31 days from the date of loss, with proof of loss provided within 90 days. Required documentation typically includes a death certificate, medical reports detailing the injuries, and any relevant police reports or accident investigations. Insurers review these documents against the policy’s terms to determine eligibility.