Accidental Death & Dismemberment Insurance Pros & Cons

by Luke Arthur ; Updated July 27, 2017

Accidental death and dismemberment insurance is a type of policy that pays out if an individual is killed or dismembered as a result of an accident. This coverage can also be purchased as a rider on an existing life insurance policy. This type of insurance comes with a few pros and cons to consider before buying.

Bonus Benefits

With an accidental death and dismemberment rider, you can get bonus benefits from your policy. Most of these riders provide double the normal death benefit compared with that of a normal life insurance policy. For example, if your policy has a face value of $1 million and you died from an accident, the policy would pay out $2 million to your beneficiaries. This allows the beneficiary to get even more money to help with expenses if you die from an accident.

Cost of Premiums

Another benefit of this type of life insurance policy is that it is relatively inexpensive. You can generally add on this coverage for a small monthly fee compared with the benefits that you receive from the policy. If your coverage doubles as a result of adding this coverage, it is basically like getting another policy. Even though you double your coverage, you are not doubling the premium rate to add the coverage.

Specific Situations Required

One of the potential disadvantages of adding this type of coverage to your policy is that it only pays out under very specific circumstances. The policyholder has to die from a specific list of accidents that are included by the insurance company. If the individual does not die from one of the approved circumstances, the policy will not pay out. The odds of dying from an accident are much lower than dying from natural causes.

Eliminates Coverage for High-Risk Activities

Even though your accidental death and dismemberment policy can pay out as a result of dying from an accident, the insurance company can opt to avoid payment if you engaged in a high-risk activity. For example, if you decide to go skydiving and you die, your beneficiaries would not receive any benefits even though you died from an accident. This means that you need to avoid high-risk activities if you want to make sure that your policy pays out to your beneficiaries.

About the Author

Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.