Life insurance policy riders are additional supplementary benefits that can sometimes be included within a life insurance policy to enhance coverage. Many come standard and might be able to be included in your policy at no extra charge, while others may require an additional premium.
Having a better understanding of what specific endorsements are and how they work, will help you determine if they are worth adding. In this article, we'll take a closer look at the Accidental Death and Dismemberment life insurance rider (AD&D).
What's an AD&D life insurance rider?
An AD&D life insurance rider is an add-on to a life insurance policy that increases the original death benefit of your policy should you die as the result of an accident. For example, if you were to have a $250,000 life insurance policy and were to die as a result of an accident, your policy could pay out $500,000 under the AD&D rider. AD&D life insurance policy riders can differ from insurer to insurer, and may not be offered on all policy types.
How does an AD&D rider work?
An AD&D rider may be available with a life insurance policy that you purchase. It is optional coverage, so you will need to assess if an AD&D policy rider is right for you.
What does an AD&D rider cover?
What's important to point out is that the terms of an AD&D rider can be very specific when it comes to what qualifies as an accidental death, as well as additional parameters relating to when the death must actually occur after the accident in order for there to be a payout. For example, you may have an accidental injury claim that meets your policy's definition of a qualifying event, but if you were to die after a specified timeframe established by your policy, your beneficiary would not receive the additional benefit. Such exclusions and limitations will vary by insurance company.
In the event you were involved in an accident and lose any two limbs (leg, foot, arm, hand, fingers), or even your eyesight, the dismemberment coverage of an AD&D policy rider will pay out the additional benefit while you're still alive. Keep in mind that the dismemberment coverage can also be just as specific when it comes to meeting the policy's definition of a qualifying event, and differ between carriers. For example, some policies state that if the policyholder does not die as a result of the accident and instead loses a limb, he/she will only receive a 50% benefit payout, while losing two or more limbs would result in a full benefit payment under this example.
Be sure to ask your insurance agent to explain all the definitions and specifics under their AD&D rider so you have all the facts.
AD&D riders may cover common accidents/injuries such as:
- Specific recreational activities
- Accidental dismemberment
- Losses of certain body parts or functions such as sight or hearing
Advantages and disadvantages of AD&D insurance
There are several factors to take into consideration when weighing the advantages and disadvantages of an AD&D rider.
Advantages of AD&D insurance
- Can help provide financial assistance in case of accidental death or catastrophic loss of physical capabilities
- Can supplement lost income in case of an accident
- Often available at lower premiums than traditional policies
- Does not require a medical exam
Disadvantages of AD&D insurance
- Coverage is limited and payout occurs exclusively in the case of accidents specifically listed in the policy contract
- If you have AD&D coverage through your employer sponsored benefits, coverage is lost when changing jobs
- Since AD&D coverage only applies in the case of certain circumstances, it may lead to a false sense of security
How can AD&D life insurance be purchased?
AD&D can sometimes be added as a supplementary coverage rider on your existing life insurance policy, or as a stand-alone insurance policy. It is also sometimes offered by credit card companies, lenders, and credit unions.
Why buy an AD&D life insurance policy rider?
Everyone has their own reasons for purchasing an AD&D rider. For some, it can be that you just never know what may happen, and having the additional coverage may be worth the peace of mind and nominal cost.
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