Accident Insurance

Accident insurance, also known as “accident only” or AD & D coverage by some insurance carriers, protects the insured’s beneficiaries against accidental death and/or serious injury to the insured.

Many companies offer their employees this kind of coverage at no extra cost as part of the benefits package. A self-employed individual or traveling salesperson who spends most of his or her time in transit may also buy a private accident insurance policy.

Who is it for

Active people, frequent travelers, heavy machinery operators, and others may purchase an optional AD&D policy as an existing life/health insurance policy endorsement or rider. These provide additional insurance coverage at a nominal fee when compared to the life or health insurance premium itself. If the individual spends a lot of his or her work life on the road, on a train, or on a plane, AD&D insurance could be an important financial planning purchase.

Consumers can purchase this coverage independently and pay a separate premium for it. Employees should ask their health benefits office about how to purchase this coverage because it may be a part of the compensation plan. The cost to the employee may be slight or nothing at all.

How it works

If the insured is killed or dismembered in a serious accidental qualifying event, this type of policy typically pays the insured’s beneficiaries or the dismembered insured a lump sum. This insurance payout can be very helpful to survivors after the sudden accidental death of a household breadwinner or significant contributor.

AD&D pays when an accidental death or dismemberment event occurs to the insured. Dismemberment means the insured loses an arm or leg or vision, hearing, or speech in a qualifying incident.

Different types of coverage in existence

Some AD&D policies do not limit dismemberment to the loss of limbs but also include the loss or eyesight or hearing. These accidental disabilities must occur according to qualified events as outlined by the policy.

The loss of an arm or leg must occur after an accident. Disability or dismemberment coverage payments sometimes depend on the severity of the disability or dismemberment after the qualifying event. For example, some insurers pay 50 percent of the payout for the policy holder who loses a leg in an accident while others pay 75 percent to those losing both legs. The policy therefore views the loss of a leg as less significant than a loss of two legs. Most policies define payout limits depending upon the lost limb(s) or use of limb(s) after an event.

Major benefits

The cost to secure this coverage is usually low and the benefits, if necessary, can be significant to the insured’s survivors. If the insured is disabled or dismembered, the policy helps him or her with a lump sum payment.