Life Insurance vs. AD&D

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August 27 | 2021

Photo by: Andrea Piacquadio from Pexels

No one really wants to think about how they will take care of their loved ones after they die, but it is important to make plans for the worst-case scenario. An untimely death impacts every aspect of your family’s life, but if you don’t have coverage from an insurance provider, your family can end up with the stress of figuring out how to financially recover.

When choosing your coverage options, you may be aware of life insurance and accidental death and dismemberment (AD&D). While these two policy types are similar, they are not the same and do not provide the same coverage. Read on to find out more about the similarities and differences so you can determine which policy is right for your family’s specific needs.

What Is Life Insurance?

Life insurance gives a policy holder’s family members financial protection should he or she die of an accident, illness or natural causes. Similar to health insurance, policy holders pay premiums either monthly or annually. The life insurance policy’s amount should be determined based on several factors, such as your debt, income and how many people are in your family. However, many experts suggest 10 to 15 times your current annual income.

There are two common types of life insurance policies:

  • Whole Life Insurance: This type of policy is active throughout your life, as long as you pay premiums, and can be treated like a cash investment.
  • Term Life Insurance: This type of policy is good for a predetermined number of years and expires once the term ends.

Pros and Cons of Life Insurance

The main benefit of choosing life insurance is the tax-free death benefit that is paid out to family members should the policy holder die. Plus, it is typically less expensive than other types of financial protections. However, it can be expensive for policyholders who are older or unhealthy.

What Does Life Insurance Cover?

While all policies differ in their specific coverages, most life insurance policies cover death caused by an illness, such as a stroke or heart attack; a disease, like cancer; or natural causes. They also cover deaths due to accidents and deaths due to drug overdose or suicide. What life insurance usually does not cover is the loss of a limb, vision, hearing or speech.


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What Is AD&D?

An accidental death and dismemberment policy is similar to life insurance in that it provides a financial payout following the death of the policy holder, but it does not cover all causes of death. A portion of the full payout from AD&D may also occur should the policy holder suffer an accidental loss of limbs. Also, AD&D is not typically a policy that is held separately from other policies. Instead, it is usually considered a type of supplemental insurance that is added to an already existing plan.

In many cases, AD&D policies are provided by employers in industries where accidents are more common. If you work a dangerous job or participate in hobbies or activities where injury is likely, you may want AD&D coverage.

Pros and Cons of AD&D

Accidental death and dismemberment policies offer coverage for things not covered by life insurance, so you can have financial protection for injuries, not just death. However, AD&D on its own does not provide coverage on all types of death.

What Does AD&D Cover?

Unlike life insurance, death due to old age, natural causes, disease, overdose, suicide or illness are not covered by AD&D. However, death due to accident, such as an automobile accident or plane crash, is covered, as well as loss of limb, vision, hearing or speech.

Do You Need Both?

If you only want to pay for one policy, it is best to go with life insurance—it covers more and is the financially smarter choice. The chances that you’ll pass away due to an illness or old age are much higher than an accidental death; however, you can layer an AD&D policy onto your life insurance. With this in mind, if your employer offers AD&D for free, it makes sense to purchase a life insurance plan as well. If you haven’t already, now is the time to get your life insurance plan in motion.

Group Insurance Solutions for Businesses

If you’re interested in affordable group life and accidental death and dismemberment coverage for your business, we can help. Contact Fringe Benefit Analysts today for a quote.

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