What Is Supplemental AD&D Insurance?

AD&D stands for accidental death and dismemberment. Supplemental AD&D is a type of insurance that pays out clearly defined cash benefits if an accident causes death, blindness or the loss of one or more limbs. Understanding its benefits and costs can help you decide whether buying supplemental AD&D insurance is wise use of your cash.

Supplemental AD&D insurance is generally quite inexpensive. In 2010, for example, one major national insurance company offered $250,000 worth of individual coverage for $10 a month and another offered $50,000 in family coverage for about $12 a month. Because it's a supplemental policy, the insurance company pays out the benefit amount in addition to any other benefits you receive from other insurance policies. Some policies offer additional benefits, such as tuition costs for a surviving spouse or day care costs for children enrolled in such care at the time of the accident.

Supplemental AD&D policies only pay benefits if the loss of limb or life was directly caused by an accident. Most policies spell out the exceptions to coverage, which usually include any self-inflicted injuries. It's important to read all the fine print to know which incidents and injuries are covered and which are not. For example, if you survive an accident but later lose a limb because of an infection contracted in the hospital during treatment, the policy may not pay the benefit.

Financial expert and radio show host Dave Ramsey includes accidental death insurance on his list of gimmick insurance types. He notes that you're not more dead if you die by accident, and your family needs just as much money if you die from an illness as if you're killed in an accident. He notes that the reason AD&D insurance is so inexpensive is the low risk of dying in an accident or losing a limb.

Ramsey notes that many people do better to buy term life insurance or increase their term life coverage with the money they save by not buying AD&D insurance. Whether that's the case for you depends on the difference between the cost of term life coverage and AD&D coverage. Keep in mind that term life coverage pays out for most causes of death, while supplemental AD&D pays out only in certain very restricted cases.

The Centers for Disease Control and Prevention note that unintended injury is the leading cause of death among people under 45. The chances of serious injury or death from accidents can be higher in some occupations. If you're under 45 or if you work in a dangerous occupation, supplemental AD&D coverage could be a way of inexpensively doubling your benefit if you die or are injured seriously in an accident. On the other hand, if your profession is inherently dangerous, your premiums may be higher than typical.

Many employers offer supplemental AD&D insurance as part of their benefits packages, and many life insurance companies offer supplemental AD&D benefits as riders on their standard term life insurance policies. You can buy AD&D insurance through other organizations, such as your credit card provider or fraternal organizations. In addition, you may get direct solicitations to buy AD&D insurance in your mail, inbox or over the telephone. Premiums vary widely, so always comparison shop before you buy.