AD&D vs. Life Insurance (vs. Disability Insurance)

by Sa El | March 14, 2019

If you’ve ever watched an episode of the show 9-1-1, the fast pace and drama make for some great — and exciting — television. As you’re watching first responders perform the seemingly impossible under the most stressful conditions, the last thing you’re probably thinking about is insurance. In reality, you probably have your hand over your chest as you remind yourself to breathe.

But back to the topic at hand… insurance, specifically what kind of insurance will protect you and your loved ones in situations like those in a medical drama?

Aside from health insurance, which serves its own purpose, there are three popular insurance products that many consider:

  • Life Insurance – covers almost all types of death.
  • AD&D Insurance – covers accidental death and some dismemberments.
  • Disability Insurance – covers disability from illness or accident.

Let’s break down each of these.

What Is Accidental Death & Dismemberment Insurance?

Lucky for us, accidental death and dismemberment insurance is more commonly known by its abbreviated version AD&D, which makes it much easier to say (and remember). This coverage literally does what it says: It covers accidental deaths, dismemberments, as well as a few other things.

What Does Accidental Death and Dismemberment Insurance Cover?
Accidental DeathDismembermentDoes Not Include
  • Death from drowning
  • Death by murder
  • Death from a fall
  • Death from a car accident
  • Loss of a limb
  • Permanent paralysis
  • Partial paralysis
  • Loss of sight
  • Loss of hearing
  • Loss of speech
  • Death from natural causes
  • Death from chronic illness
  • Death from terminal illness

AD&D policies pay out a lump sum payment based on the coverage amount purchased, as well as any limits the policy could have. For example, you could have a policy that pays out $500,000 if you die from an accident or $100,000 if you are dismembered. The length of the policy is up to a specified age, usually 65.

Even though this type of policy is not one you ever want to have to use, it’s worth considering.  It’s the only policy that will cover you specifically for dismemberments, aka loss of limbs, as well as loss of eyesight and hearing.

These policies are extremely affordable. The premiums are just a fraction of the cost of traditional life insurance policies, and you may even have the option to add AD&D insurance as a rider on your policy, depending on your insurance company. These policies usually don’t require any underwriting so almost anyone can be covered. It may even be offered by your employer.

And, if you’re in a position where you can’t qualify for traditional life insurance due to a medical condition, an AD&D insurance policy may be your next best option.

What is Term Life insurance?

While an AD&D policy will only cover death if caused by an accident, term life insurance will cover almost all causes of death.

Term life insurance is simple. The policy lasts for a specified term (10, 15, 20, or even 30 years) and has a very affordable monthly premium. You also pick your coverage amount when you buy the policy (such as $500,000) which is what your beneficiaries would receive if you were to pass away.

There are some exclusions — situations where your policy does not provide coverage, like skydiving. When applying for life insurance coverage, you’ll be asked questions about risky hobbies and behaviors during underwriting. (Answer honestly!) This information will also be in your policy documents. There’s also what’s called the contestable period, usually the first two years of a policy, where an insurance company has the right to investigate the death and review information.

In general, if you want your life to be covered for more than just accidental deaths, then you are going to need a traditional life insurance policy.

Term Life Insurance vs. AD&D Insurance
Cause of DeathLife InsuranceAD&D Insurance
Accident             YesYes
Suicide* Yes*No
Critical illnessYesNo
Chronic illnessYesNo
Terminal illnessYesNo

*Suicide may be excluded during the contestable period. Check your policy documents or contact your insurance company for more information.

As you can see in the above chart, these two products serve an entirely different purpose, so it is essential to know which product will work best for your lifestyle.

What is Disability Insurance?

When looking at the word “AD&D,” for some reason we want that last “D” to stand for disability, but it doesn’t.

Instead, you should think of disability insurance as coverage for your paycheck.

If you’re unable to work for an extended period because of a disability — from either an accident or illness — this policy will pay out a percentage of your annual income every month. This monthly payout can be used to cover any expenses you need for your household to survive while you are disabled.

An AD&D policy will only pay out for a dismemberment, so if you break your hand and can’t write for seven months, your AD&D policy wouldn’t cover it. However, your disability policy would.

What Does Disability Insurance Cover?
Permanent DisabilityPartial Disability
  • Loss of Speech
  • Sight in both eyes
  • Hearing in both ears
  • Use of both hands
  • Use of both feet
  • Use of one hand
  • Use of one foot
  • Loss of Speech
  • Sight in both eyes
  • Use of one hand
  • Use of one foot
  • Illness

Premiums for an individual disability policy can vary depending on your income. However, many employers offer disability coverage as a benefit, so it’s possible you’re already covered.

In short

The best thing about these products is that even though they overlap a bit, they are completely different. Best of all, you don’t have to pick just one. Depending on your needs, it might make sense to purchase all three.