An Accidental Death and Dismemberment policy is quite different than a life insurance policy. It might be connected to your life insurance policy, or your health insurance policy, in the form of a rider. This is not the kind of insurance that most people enjoy thinking about, and so, most people do not have a clear idea about what it will, and will not, cover.
Since an Accidental Death and Dismemberment policy is a rider, and not a stand alone policy, it will add some cost to the premiums of whatever insurance it is connected to. An AD and D policy pays out a set amount of money to you, (or to your beneficiaries), if case you are dismembered, or in case you die, as the result of an accident. One advantage of having this policy attached as a rider to your life insurance is that if you die due to an accident, your beneficiaries would get funds from your life insurance, and from the AD and D policy.
Keep in mind, however, that this is a very limited form of insurance. There are quite a few restrictions that will affect whether or not this kind of insurance will cover something. In many cases, you might already be covered for the same kinds of things through other insurance policies that you already have.
The very name of the policy includes the word “dismemberment”. This gives a lot of people the false impression that the insurance will cover all types of accidental dismemberment. Unfortunately, this is not the case. Let’s say, for example, you are doing something at home with power tools, and accidentally cause dismemberment to one of your fingers. You get lucky, the missing part is located, and the hospital is able to reattach it. Will your AD and D policy cover the costs?
In most case, no, it won’t. The insurance company will only pay out if a “significant impairment” has occurred. In order for it to be “significant”, it generally has to be a dismemberment that occurs above the wrist. Some insurers will pay out if you lose a thumb and a forefinger on the same hand, but even that is no guarantee of payout. Some policies will only pay 50% of the benefit if you lose an entire limb. Logically, all of these kinds of losses are significant to the person who experiences them, and will greatly affect that person’s ability to function in life. However, insurance companies don’t always use logic in their decision making process.
Oddly enough, if you lose your ability to speak, you might get a 50% payout. To get 100%, you would have to lose your ability to speak along with the your ability to hear, or perhaps your ability to see. It generally will pay out 100% if you are paralyzed.
Just like a typical life insurance policy, the AD and D policy will not pay out if your death was due to suicide If a person attempts suicide, and survives, this policy will not cover the cost of treatment for the injuries. If you are accidentally injured while you were committing a crime, or attempting to commit a felony, the policy won’t pay out for that, either. It also will not pay out if you were injured while you were intoxicated, or if you were doing something really risky, like skydiving.
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