The Accidental Death and Dismemberment Rider

We’re now in the grey area. On one hand, we don’t want to start adding lots of riders to our term life insurance policy that cumulatively add a lot of cost. This cost, by the way, could simply purchase more core term life protection. On the other hand, AD&D speaks to us at such an emotional and base level, that it’s hard to ignore. Let’s try to really understand the Accidental Death and Dismemberment rider to see if it works for us.

It’s sound pretty grizzly. Dismemberment. Accidental Death doesn’t exactly give us warm fuzzy feelings. Before we analyze if this is a good use of our life insurance budget, let’s look at the common parameters of AD&D riders that are sold in the market.

In a nutshell, if a person dies from an accident, the policy usually pays double the original term life amount. For example, if you have term life for $500K and an accidental death occurs, the policy would pay out $1M. There should be a gut-check question here of just how exactly the carrier could pay out double for an amount that is definitely short of double the cost. It’s all about probability and life insurance. The life insurance company has reams of data showing how people have died and the percentages of those that are accidental can be broken out separately. If .0004% (40 out of 100,000) die of accidental death according to the CDC, they can figure that into a premium amount with a margin or profit included. That’s a very small amount or probability. They can easily charge you an additional premium with a fairly good margin and account for this low probability.

The wording is usually very specific as to what qualifies to trigger the benefit. There’s actually a big difference between “accidental bodily injury” and death by “accidental means”. If legalspeak and semantics come into play in the life insurance world, let’s assume it’s usually not in your favor. That’s one issue we have with Riders.

Usually, there a time frame after the injury that death must occur. This tends to be from 3 months to 6 months on average. This means that if you have an accidental injury that meets the definition of their AD&D benefit but you pass away 9 months later, the benefit would not be paid out.

The dismemberment side of things is one of the few benefits where the insured received the benefits. The benefit is usually paid out for loss of sight, loss of hand(s), or loss of a foot (feet). Amputation may not be covered unless medically necessary or as the result of an injury.

What’s our take on AD&D? It depends on the cost. If the cost is very low…then maybe. To some extent, AD&D is a sales tool to address the macabre thought of dismemberment and/or accidental death. It’s a mental crutch that helps the prospective life insurance shopper push such horrific occurrences back. To some extent, the life insurance companies know this and are able to offer these riders at a profit. A less cynical person might say they are responding to demand of their customers. Once you have narrowed down the carrier, plan, and insurance rate, we would be happy to look at the particulars of Accidental Death and Dismemberment to see if it makes sense for your situation.

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