Difference Between Life Insurance and Accidental Death and Dismemberment

While there are many variable features of life insurance, most products are designed to provide a death benefit when you pass away, often alongside an account value that increases over time. The issue can be that a policy like increasing term life insurance will typically insure against natural causes of death without covering accidents or injuries.

Accidental death and dismemberment (AD&D) is not an alternative to life insurance but an additional benefit you may be able to add to your policy. This coverage offers additional benefits for a fatality or dismemberment linked to a road collision, fall, or other accident.

AD&D is usually added as a rider to a life insurance policy and can extend the scenarios in which your beneficiary would receive a death benefit. If the death is a result of a covered accident, the insurance company could provide an additional payout to your recipient.

Adding AD&D to your coverage means that you may also be able to claim against your insurance for a serious injury, such as the loss of a limb or damage to your eyesight. The exact terms of insurance may differ, but many policies offer tapered payouts depending on the severity of the injury and how this impacts your ability to return to work or continue your usual routine. 

The main contrast between these two products is the type of fatality or injury they protect against. Although you may be able to purchase AD&D coverage as a standalone product, it is more often incorporated into a broader-scope life insurance policy.

Unlike life insurance, AD&D does not have an account value element and is purely insurance against a death or injury. Life insurance, in contrast, may have an account value component that allows policyholders to grow the value of their policy over time and potentially access their account value in the form of a withdrawal or loan.

Although both products have a death benefit value, the circumstances in which these apply are distinct:

• Life insurance policies normally pay the death benefit when the policyholder dies. Some life insurance products cover accidental deaths, which may provide an additional payout.
• AD&D provides a death benefit payable in a wider range of scenarios. This might include workplace and industrial accidents, drowning, asphyxiation, falling from a height, or accidental poisoning–many of which would not be covered by a life insurance product.

AD&D also provides additional coverage for accidents, normally with a specific list of exclusions and exceptions in the insurance policy. This coverage can extend to accidents that cause the loss of hearing or a limb, serious incidents that result in paralysis, or accidents that cause another impairment that limits the policyholder's ability to earn the same income as before the injury.