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Term life insurance vs. AD&D insurance

Have you been shopping for insurance to help protect your loved ones? If so, you may have considered term life insurance. But you might also have considered accidental death and dismemberment (AD&D) insurance. Although they might sound similar, term life and AD&D offer very distinct kinds of protection. Read on to understand the differences.
July 26, 2023
4 min read
What's the difference between term life insurance and accidental death and dismemberment insurance?

What is term life insurance?

Term life insurance pays out a benefit to your designated loved ones if you pass away during the term you are covered for. The benefit will generally be paid out whether you died in an accident or from an illness or other cause, although there are some causes of death such as suicide and certain high-risk activities that the average life insurance policy might not cover.

Unlike whole life insurance, which lasts your whole life as long as you keep paying premiums, term life insurance typically expires after a period of 10, 20, or 30 years. Because of this, if you buy term life insurance while you are young and healthy, you can often get a relatively high amount of coverage for a price that’s more affordable than the average whole life policy.

Since people who have dependent children are also likely to be younger and in good health, insurance experts often recommend term life insurance to them.

Many term life insurance policies can eventually be converted into whole life insurance policies that don’t expire, including those from TruStage®.


What about accidental death & dismemberment (AD&D) insurance?

How is accidental death & dismemberment (AD&D) insurance different from term life insurance? AD&D insurance pays a death benefit to loved ones, but only if you die from a covered accident like a car crash. If you die from a natural illness like a virus or cancer, AD&D insurance typically will not pay your loved ones a benefit.

AD&D does have one additional feature, however. If you lose a limb in an accident, AD&D insurance will usually pay you a “living benefit” to assist you with recovery. The amount of your living benefit would depend on the nature of your injury. For example, if you purchased an AD&D policy with a death benefit of $100,000, your living benefit for a lost leg might be 50 percent, or $50,000. If you suffer a catastrophic injury such as quadriplegia, you might receive up to 100 percent of the death payout.


Why do some insurance experts recommend that you buy AD&D insurance?

When people first purchase insurance to protect their loved ones, it is often because they have young children. People who have young children are more likely to be under the age of 45.

According to the United States Center for Disease Control, the leading cause of death for people under 45 is unintentional injury.

For this reason, if a young, healthy person needs some kind of insurance to protect their loved ones, AD&D insurance may be an affordable option. This is because the cost of AD&D insurance is typically less than that of term life insurance.


The drawbacks of choosing AD&D insurance over term life insurance

While the low cost of AD&D Insurance can be attractive, it’s important to remember that AD&D does not cover many kinds of natural illness.

So, if you were to die from a serious illness such as cancer, heart disease, or any contagious virus like HIV, SARS or COVID-19, and you only have an AD&D policy, your loved ones would not receive a death benefit. That extends to a living benefit as well. If you sustained a permanent disability from a serious illness such as diabetes, you would not receive any kind of living benefit from AD&D insurance.  The bottom line: AD&D covers accidents, not illness.

It’s helpful to know that once people reach 35, the next-highest cause of death after accidental injury is cancer, followed by heart disease. After age 45, natural illnesses of all kinds become the main reasons people pass away.

Therefore, if you buy an affordable term life insurance plan while you are younger and in good health, you can protect your loved ones for a long period in a wider range of circumstances.


The best of both worlds

When it comes to term life and AD&D insurance, it’s important to remember that both kinds of insurance are valuable, but they’re not interchangeable. While AD&D offers the reassurance of a living benefit for injury caused by an accident, it will not provide a benefit to loved ones if you die of a natural illness like cancer.

Many insurance experts consider a combination of term life insurance with an AD&D rider to be the best of both worlds for protecting your family. An AD&D rider is an amendment to a term life insurance policy that offers some or all the benefits of AD&D insurance on top of term life insurance. Many insurers offer such a rider in exchange for higher premiums and a one-time fee.

If you choose to, you may also be able to purchase separate term life insurance and AD&D policies. If your employer or credit union provides you with an AD&D policy, consider adding on a term or whole life policy to help broaden your protection.

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