Death Insurance or Accidental Death and Dismemberment Plan

Updated: 01-10-2019 12:31:53 PM

A life insurance policy is the most basic and popular insurance plan worldwide. However, with changing times, you need to have something more than just a life insurance. A death insurance or an accidental death and dismemberment (AD&D) plan is one such important plan. This can be purchased as either a stand alone plan or an addition to the term plan.

Looking at the needs of the evolving customer base, insurance companies have come up with new types of policies and products. This has added a new dimension to the insurance industry.   However, many also think whether a death insurance plan should be purchased separately or added to another policy?

First, we need to understand the features of AD&D plan. There are many terms in this policy and the decision is to be made based on your lifestyle and your insurance requirements. The major factors to be considered here are mainly the number of dependents and other common risk factors.

Structure of AD&D Plan

The AD&D policy provides the full payout in case of death by accident and partial payout in case of severe injuries. Some examples of the terms that are related to payment in an AD&D policy are given below:

• If the insured suffers the loss of limb/s (leg/arm), he can avail 50% of the policy face value
• In case of losing the index finger or thumb, the insured can claim 25% of the pay
• The loss of both hearing and speech can get the insured 100% of the amount but losing either of both will only help to get only 50% of the total amount
• If the insured faces damage of one eye/eyesight in one eye,50% claim is possible
• Paralysis of all limbs and torso involves 100% payout of the coverage amount,whereas in case of partial paralysis, up to 75% of the amount is paid.

Benefits of AD&D Plan

The term life insurance policy is useful in case of death of the insured, but the addition of AD&D will cover any major injuries and accidents apart from death. The choice of a proper plan depends on your lifestyle, risk factors and beneficiaries. To understand things better, you can also compare different plans online through premium calculator. This will give you an idea about the right plan as per your needs and affordability.

One additional major benefit of opting for AD&D in addition to life insurance is that it will add largely to the insurance claim in case the insured dies in an accident. For example, if an individual has a term life insurance plan and AD&D plan and dies of natural reasons, they will receive 100% of the policy value. On the other hand, the beneficiaries can receive up to two times the payout in case of accidental death.

There are plenty of pros and cons that should be considered before buying the right insurance for yourself. But considering AD&D as a rider to your life insurance plan can help get coverage not only for death but also severe injuries. The life insurance plan covers the benefits in case of death of the insured but not in case of major injuries and disabilities. Thus, it can be helpful as an additional policy to get cover for uncertain casualties in future.

Exceptions to the Policy

The terms and conditions of this plan are different from other life insurance types. It is required to completely understand the terms and conditions of the policy before opting for the purchase. The major terms and conditions of death insurance or accidental death and dismemberment are:

• AD&D does not cover death due to illness or drug overdose
• Death in case of drunken driving and suicide are not covered
• Insured is eligible for a partial payment in case he gets disabled
• It provides full coverage for any type of accidental death of the insured
• Beneficiaries will not receive any payment if the insured dies after the time mentioned in the policy is over

Many terms and conditions in the policy could lead to receiving no payment and hence, this policy is good as an addition to the life insurance plan but might not be a feasible option as a standalone policy. Other exceptions in the policy involve no payout in case of death by high risk activities. Some of them are:

• Car or bike racing
• War
• Skydiving
• Surgery complications
• Mental illnesses

Based on these regulations, it is clear that in certain situations the policy face value cannot be claimed by the beneficiaries even in case of uncertain death. The term life insurance policy ensures a full payout if the insured dies before the completion of the policy tenure except in case of a suicide within two years of the purchase of the policy. If the insured individual lives past the tenure of the plan, then he/she receives the full payout at the end of the tenure in some plans. Term life insurance is, therefore, a safer choice regarding payouts and therefore, for ensuring the financial security of the beneficiaries.