Accidental Life Insurance: Everything You Must Know

Posted on July 5, 2019 and updated July 8, 2019 in Life Insurance Canada News 8 min read

You’ve likely seen “Accidental Life Insurance” or “Accidental Death and Dismemberment” on your employee benefit booklet or as a rider on an individual policy. What is this coverage and how does it differ from other forms of life insurance? Today we will discuss everything you need to know about Accidental Life Insurance / Accidental Death and Dismemberment, aka AD&D, so you can decide if this coverage should be a part of your insurance protection.

What is accidental life insurance? Is it the same as AD&D Insurance?

Technically, there is a difference between Accident Insurance and AD&D insurance; however, most insurers offer AD&D. Sunlife offers both with Accident Insurance, which covers some fractures, injuries, and wounds, while their AD&D covers loss of life or loss of and/or the use of sight, hearing, limbs, etc. However, since it is the more popular option and the more complete coverage of the two, we will be discussing AD&D insurance in this article.  While it is common to say “Accident or Accidental Life Insurance” when referring to this type of coverage, these terms are usually referring to AD&D.

AD&D protects you financially if your die or become dismembered (includes loss of sight and hearing) as the result of an accident. This differs from term life insurance, whole life insurance or universal life insurance that is underwritten on known factors, such as health, age, and lifestyle. Since accidents are unexpected and random, this coverage provides extra financial support and is not medically underwritten. It is most typically seen as part of a group employee plan or as a rider on an individual policy, but you can find standalone AD&D policies, too.

According to Statistics Canada, cancer and heart disease remain the top killers for Canadians. Accidents such as vehicle fatalities, gun violence, and slips and falls rate low on the scale of probability for both men and women. Motor vehicle accidents in Canada, the most frequent type of accident, saw 1,679 fatalities in 2017 vs the estimated 80,800 cancer fatalities during that same year.

With such low odds, is AD&D worth it? Well, do you play the lottery? With such low odds of winning the jackpot, you know there is still a chance. For someone that is a daily commuter, or that works in an environment like logging or around power tools, their risk is higher. However, everyone can benefit from the protection of AD&D. As we will discuss further in this article, the cost is minimal and can greatly offset the risk. Remember, accidents don’t always result in death; having a financial cushion while you retrain to a new career due to sight, hearing, or limb loss is always a good idea.

What does accidental life insurance cover?

Most AD&D policies cover the loss of hands, feet, eyesight, speech, hearing, limbs, fingers, and partial or full paralysis, in addition to accidental death from things like car accidents, homicide, or drowning.

AD&D does not cover suicide, accidents from war or civil unrest, drug overdoses, vehicle accidents when the life insured is driving under the influence, the death of a professional athlete while performing his or her sport, death resulting from breaking the law, or death from reckless activity, such as speeding. In some cases, AD&D may exclude certain activities. If your hobby is diving in a shark cage, you may not be covered for drowning or injuries sustained while diving.

How does accidental life insurance work?

AD&D must be applied for as a standalone policy or as a rider, if it is not part of your group benefit plan. Claims must be submitted as per the instructions in your policy booklet, with attention paid to the claim submission time limits.

As an example of how AD&D works, let’s consider Jane Smith. Jane is a healthy 40-year old non-smoker who has life insurance underwritten on her good health and active lifestyle. She opts in for the AD&D rider. Sadly, during the policy term, she is involved in a terrible accident in which she loses two fingers, one leg, and sight in one eye. Each body part/function has a prescribed benefit (payout) that can be the lump sum of the benefit, or a percentage. For example, the loss of a leg could pay out 75 percent of the policy while the loss of one hand or foot pays out 100 percent.

Dismemberment is a living benefit, meaning it pays the life insured while they are still living. If Jane had passed away in the accident, the death benefit would be paid to her beneficiaries, over and above the payout they would get from her life insurance (the beneficiary receives life insurance and AD&D benefit). 

Does accidental life insurance cover heart attacks?

A heart attack is not considered an accident. Life insurance or critical illness insurance is used to cover heart attacks, strokes, and death from any cause (unless excluded due to a pre-existing condition). However, traditional insurance does cover most accidents that result in death (again, check the exclusion list on your policy). AD&D is paid over and above traditional life insurance, making it an excellent top up, additional coverage in case of dismemberment but not death, or affordable partial protection if full life insurance coverage is not desired/affordable.

What is the difference between life insurance and accidental death? Does life insurance cover accidental death?

Life insurance is based on mortality tables that are easily linked to predictable events, like age and likelihood of disease. There is no such predictability for accidents, however, as accidents are random. Therefore, life insurance covers you for death due to accidents and health-related events, while AD&D only covers an accident not death from cancer, heart attack, stroke, complications from diabetes, or death from natural causes. Remember, though, that traditional life insurance does not cover dismemberment, but AD&D does.

Accidental life insurance rates: overview

Rates for AD&D vary among insurers, but we can use these ballpark figures to understand the costs.

  • A healthy 35-year-old non-smoking male under an SSQ Insurance Term 10 plan would pay an annual fee of $187.50 for $250,000 of life insurance AND a $10,000 AD&D rider. That’s just $16.88 per month for life insurance with an AD&D rider. The rider is $12.50 for the year.
  • A healthy 35-year-old non-smoking female under a Manulife Term with Vitality policy for Term 10 coverage of $500,000 of life insurance and a $10,000 AD&D rider pays just $243.60 a year – a low $21.66 per month for insurance AND AD&D. The rider is $0.75 per month. That’s right, less than a dollar a month to add AD&D.

As you can see, AD&D gives you a lot for paying very little. Isn’t it worth the peace of mind that extra few dollars can provide?

Learn More

To learn more about AD&D or any other type of insurance, please contact our life insurance experts and get free insurance quotes to make the best decisions about your life insurance.

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