Many prospective insurance buyers wonder whether they need to buy death and dismemberment insurance (AD&D). At first glance, AD&D might seem like a good deal; premiums are low and payouts are relatively large if you die or lose a limb, sight, or hearing in an accident. Some policies offer $250,000 for as little as $10 a month. However, these policies only cover very specific cases that the majority of policyholders will never face. At best, AD&D should be used as a supplement to other, more comprehensive, insurance plans.
Most AD&D claims are paid out as a result of death by accident, but the likelihood of dying in an accident is very small. In 2006, only 121,599 Americans died in accidents. You are more likely to die of an accident than natural causes the younger you are, but the older you get, the less likely you are to die of unnatural causes, making AD&D less necessary. Furthermore, these policies do not cover risky activities, like drunk driving, skydiving, or car racing. Nor do they cover drug overdose, suicide, mental or physical illness, or death from surgery. There are very real limits on what can be claimed as an accident.
Policyholders can also claim either the full amount or a partial amount of their coverage if they lose a hand, foot, arm, or leg. Full coverage can be claimed if the beneficiary loses sight or hearing. Again, this all sounds lucrative, but the odds are against anyone losing any of these things outside of war are slim (and accidents during war are, of course, not covered). Plus, most of this is covered in more comprehensive policies like life insurance, health insurance, or worker’s compensation.
Since these incidents are covered by other policies, the only real reason to have AD&D coverage is for a lump sum check, which you wouldn’t get if you lost a leg in a workplace accident or lost your sight in a car accident. That money would be useful for recovery time, but not necessary if you have other coverage. Perhaps the only time it would make sense to buy AD&D is if you work in a risky field and wanted extra protection. In these cases, though, your premiums would be higher.
Some insurance industry specialists suggest you should have equitable life insurance and AD&D benefits. With that combination, if you die in an accident and have a $250,000 life insurance policy, your beneficiary would receive another $250,000 from the AD&D policy. Some policies offer more if there is evidence that you were behaving safely at the time of the accident. For instance, your beneficiary might be entitled to $10,000 more if you were wearing a seatbelt at the time of the accident.
But none of this money will be paid to you or your beneficiaries if you did not die or weren't injured in very specific ways. Though you can purchase AD&D for as little as $60 a year, it might be better to shift that money to supplement your life insurance policy. Again, unless you are in a dangerous line of work where a catastrophic injury is a real possibility, then AD&D is probably unnecessary for your needs.