How Does AD&D Insurance Pay Out?

how does accidental death and dismemberment insurance payout - everyday life insurance - online life insurance calculator

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Jake Tamarkin, MBA

Jake is a nationally-licensed insurance agent with a Masters in Business Administration and CEO of Everyday Life. His expertise has been featured in: Investopedia, Life Insurers Council, Insurance Thought Leadership, Life-Annuity Agent, and Insurtech Insights.

Accidental Death and Dismemberment (AD&D) insurance can be a critical part of your financial safety net, especially if you’ve been denied life insurance. But how do payouts work in the event of a claim? Let’s break it down.

What Is AD&D Insurance?

Accidental Death and Dismemberment (AD&D) insurance is a type of supplemental insurance that provides a payout if you die or suffer a loss of limb or bodily function due to an accident. If this sounds similar to life insurance, remember this: life insurance covers death from any cause, while AD&D only covers deaths caused by accidents.

AD&D insurance is usually used to complement a life insurance policy or might be purchased if someone has been denied life insurance.

How Do AD&D Insurance Payouts Work?

1. Accidental Death Payouts

If the insured person dies as a result of an accident, the policy’s beneficiaries receive a lump sum payout. This payout is typically equal to the policy’s face value, which can range from $10,000 to $1,000,000 or more, depending on the coverage amount chosen.

2. Dismemberment Payouts

If the insured suffers a qualifying injury, such as the loss of a limb, eyesight, or hearing, the policy pays out a portion of the face value. The amount paid depends on the severity and type of injury. For example:

  • Loss of one limb or sight in one eye might pay out 50% of the policy’s face value.
  • Loss of two limbs, eyesight in both eyes or a combination thereof typically results in a 100% payout.

Conditions & Exclusions

Understanding the fine print of your AD&D policy is crucial. Most policies have specific definitions and exclusions. For example, the event must be accidental and directly result in death or dismemberment. Natural causes or pre-existing conditions typically don’t qualify. 

Typically, death or injury from drug overdose, suicide, illness, war, and certain high-risk activities like skydiving or racing are going to be excluded.

Filing a Claim

To file a claim, the beneficiary or insured person must follow these steps:

  1. Notify the Insurance Company: Do so as soon as possible to report the accident and initiate the claim process.
  2. Submit Required Documentation: Send them the necessary documents, like the death certificate, police reports, medical records, and proof of the accident.
  3. Claim Review: The insurer will review the claim, and potentially investigate further to make sure the accident meets the policy’s criteria.
  4. Payout: Once the claim is approved, the insurer sends the payment to the beneficiary or the insured person.

Try Our Online Life Insurance Calculator

AD&D insurance can provide significant financial support in the event of a tragic accident. But if you’re considering it a replacement for life insurance, you should first talk to an expert.Many people end up with an AD&D policy because they’ve been denied life insurance. But there are actually many options available today for those who might have been denied in times past, and the benefits are often better than what an AD&D policy would get you. We encourage you to try our life insurance calculator before making any purchases. It’s totally anonymous, doesn’t ask for an email address, and takes less than 5 minutes.

Disclaimer: The comments, opinions, and analyses expressed at Everyday Life are for informational purposes only and should not be considered individual investment, legal or tax advice.

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