What is AD&D Insurance?

Dear Linda,

I can buy AD&D Life Insurance at work. The coverage is cheap - should I buy it?

You can, but let’s confirm you’re clear on what it is. People often don’t understand how narrow this coverage is, leaving them with a false sense of security that their loved ones are protected if something happens to them. In reality, AD&D covers very few situations (which is why it is cheap) and is not a replacement for a Term Life Policy.

Accidental death and dismemberment insurance (or AD&D) requirements

AD&D policies payout to beneficiaries if the insured dies in a covered accident. There will generally be a partial payout if you survive but are severely injured, such as losing a body part or the ability to hear, see, or speak, due to a covered accident.

Accidents due to a dangerous hobby, such as skydiving, likely won’t qualify for a payout. If you have a heart attack first, which led to the accident, there will be no payout. Additionally, if you don’t die as a direct result of the accident, but instead from a disease or complication after the accident, there is no payout.

Payouts for Term vs. AD&D

Term insurance also has exclusions but coverage is much broader than an AD&D policy since it includes death due to natural causes, such as heart disease and cancer. Exclusions include involvement in criminal activity, death under the influence of drugs or alcohol, and death due to something undisclosed during the application process (a hidden smoking habit or a dangerous hobby). Suicide can also typically be excluded in the first couple of years the policy is in force.

Obtain the amount you need in Term Life

While AD&D coverage is not bad, I don’t typically recommend purchasing additional amounts above and beyond what your employer may provide for free. If you need life and disability protection, consider the much broader Term Life policy and a Disability Policy.

originally published 11/12/2018

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.