What is AD&D Insurance?

Accidents and death are unimaginable, and at the same time, unpredictable. We can never know when it’ll occur and how will it happen, but one thing we know is that it will affect us and the people that surround us for sure. 

Due to these inevitable events, businesses created a solution we called “insurance”. Insurance is everywhere and in any form. It is designed to make us live with fewer worries about the future. Whenever misfortune occurs, we are somehow or somewhat confident that we can get assistance when we are insured. Insurance is not just any protection; it also serves as a trust fund that we can count on or collect in times of need. 

A monetary fund is indeed essential not only for our daily necessities but most especially for emergencies like unforeseen accidents. However, if we rely solely upon the savings we deposit to banks, we might end filing for bankruptcy. It is the main reason why everybody favors getting an insurance. 

One of many insurances available in the market is accidental death and dismemberment insurance, also known as AD&D insurance. This type of insurance grants compensation for your family if you got into an accident and as a result, you lost a part of your body or worse you died. It is somehow comparable to a life insurance policy, but only because it also offers a death benefit. On the other hand, they are different in many ways, and you cannot trade choosing this over life insurance. Why? Because there are certain restrictions to this insurance. For instance, your family or preferred beneficiary will not be able to get a hold of the payout you invested if you passed due to a disease (and not by accident). 

AD&D Insurance

AD&D insurance policy is basically composed of two separate and different guarantees: the accidental death coverage and dismemberment coverage. Each division of these two policies states its systematized term and condition independently. But take note, once you register to AD&D insurance, you have both blankets automatically. That means that you cannot buy accidental death coverage alone because the two comes together.  However, you can acquire AD&D insurance in its entirety individually or as an addition to another policy such as life insurance or term life insurance to be specific. You’ll get the same benefit to whichever is preferable for you. But let’s say, you are eligible for a hundred thousand dollar benefit under the life insurance you selected, plus you combined it to an accidental death rider. Once you pass away due to a covered accident stated in the policy, your successors can have a hundred thousand dollar from your life insurance. But, it does not just stop there. They also have another hundred thousand dollars from the AD&D insurance. This is the scenario why it is also called as “double indemnity” because your family can get double payout than the normal.

Reminder: As mentioned earlier, you shouldn’t consider AD&D insurance as a replacement for life insurance. The coverage of the AD&D plan is only limited to accidents and accidents alone; thus, this means that the level of protection it offers is not the same with life insurance coverage. 

An AD&D policy can only cost your pocket about $0.02 (two cents) monthly for $1,000 worth of coverage. You pay the full cost for your coverage through payroll deduction. Though AD&D costs this low, however, you cannot rely on your family’s protection purely on it. As previously discussed, you still have to enroll dependents to an insurance that provides a broader coverage since it’s not all the time that accident occurs; it can also be health issues and other events. 

Accidental Death Coverage 

Research shows that accident is one of the top 10 primary causes of death in countries like the U.S. and Canada. Teens and young adults are usually prone to this risk since they are adventurous and are likely to indulge in new breathtaking activities. Though AD&D is for everyone, it is recommended that people at their near retirement age should choose an insurance that helps them prepare for their retirement instead.

Accidents that are commonly covered by AD&D include the following events: 

  • accidental fall and drowning
  • exposure to the elements
  • traffic incidents or road collisions
  • common carrier accidents (trains, buses, public vehicles)
  • plane crash
  • accidents involving massive machinery or equipment
  • and if got murdered – for instance

Every insurance policy has its coverage limitation, and AD&D is not an exception to this. Extreme outdoor activities such as scuba diving and cliff diving/base jumping are usually excluded in the covered accidents. However, deadly hobbies are trending nowadays reason why some insurance companies extend the list of coverage to include these risks (but for a higher premium). Natural causes of death are also unwelcome to AD&D policy. These causes involve illnesses, surgical procedures, war, and suicide. Other exceptions include death due to the influence of any non-prescribed narcotics or liquor. Because of the said restrictions,  accidents are formally examined. The deceased insured also undergoes an autopsy before the insurer approves a claim. 

Dismemberment Coverage

If you got into an accident covered by the policy and incur a loss in some parts of your body, it is when dismemberment coverage is utilized. Covered loss includes sight, hearing, or speech, partial or permanent paralysis, and the loss of specific body parts such as legs and arms. Other than this commonly covered loss,  extended body damages/fractures included and the amount financed differ in each insurance company. Typically, covered loss and additional extended coverage are identified one by one in the contract.

So whenever an insured encounters accident that caused his loss of limb, AD&D will shoulder the payment of the disowned part.  As mentioned, the cost of finance for the loss of body parts are defined by the policy you signed in (depending on the type of insurer you chose). Payments usually come into percentage and are stated in the coverage, including a specific rate equivalent to each damaged part. The corresponding amount and loss part may be calculated individually or as a combination, depending on what is stated in the policy. Usually, you will get 50% of your death benefit as your dismemberment benefit if you lose one limb. Some insurer offers 100% of a death benefit for a multiple loss of limbs. But, it is rare for policy to pay 100% amount for anything less than a combination of the loss of a leg and a significant bodily function such as vision.

If you’re a risky individual who is likely to die or lose a limb due to an accident, then AD&D is the right insurance for you. Or if you’re occupation is prone to disasters like a site engineer – for example, then you should get AD&D insurance for sure. But remember, do not depend your life and future incident expenses to it, having an additional protection is a lot more reassuring.

What is an Insurance Premium?

Security and peace of mind is a package anyone would grab at any cost. Living life with upside downs can be very stressful and overwhelming.  When an uncontrollable adverse event occurs, these times make us feel as if the world we built for our dreams and people we love has ended. 

Indeed, the concept of insurance helps us overcome many of our fears of the future. Having an insurance is the same feeling as not getting wet when it rains because you have an umbrella. It gives us a different perspective on how to face unfortunate scenarios with confidence and readiness. It is a different thing to be so much safer than ever. But of course, nothing comes for free. If you go shopping, you’ll see that everything comes with a price tag. You have to pay for the things you want to possess. In short, if you want security and peace of mind, then you have to earn it. And one of the many ways to be secure and at ease is through insurance. There are different kinds of insurance which you can be a part of, depending on what you need and your capability to pay. But we’re not going to discuss it further. Instead, we’ll talk about the price tag of insurance which we commonly called as premium.

What is a Premium? 

Since every profit needs investment, so is protecting one’s life, family, property, and even pets. Saying this, an idea might have come to your mind what premium is. Premium is the price of the insurance you entrust to cover your precious belongings like your house – for example. The insurance company collects most of the premium insurances regularly (monthly or annually, depending on the policy you selected) to keep your coverage active and continuous (to continue the state of being insured). Let’s say, you buy a house insurance and is regularly giving your contribution when your house was destroyed due to a qualified disaster (based on the policy you agreed), this means your insurer (insurance company) will shoulder the expenses, and you are safe from the cost of repair and reconstruction. However, when you suspend your payment at the time you encounter the said circumstance, the insurer can void the policy and is free from any obligation of your home’s rebuilding.

Why Premium and not Payment?

Come to think about it; if a sales agent approaches you and sells something that needs payment, you may decline it automatically without hearing what it has to offer. So instead of mentioning “payment”, a premium is a lot nicer to hear. Well, actually, they convey the same thought, but the word “premium” is a bit lighter to take in. Payment is more on bills with dues which give you headaches all the time while a premium is like an investment to things that gives you greater benefit in return.

How Much Does It Cost?

There is no specific range as to how much an insurance premium can cost. It always depends on the type of insurance you want to purchase and the coverage you choose. That is the reason why most insurance experts would recommend interested buyers to shop for insurance first before making a selection. It is always best to gather information from different insurance companies and compare the cost and policy they offer. In this way, there’ll be a higher possibility for you to choose the best premium – one that provides better benefit yet saves your pocket from distress.

If the Cost is Not Specified, how is it Calculated then?

When calculating how much would the premium cost in a particular policy, many factors take place. However, the primary key to it all is how likely you will file for a claim or how frequent you’ll possibly make use of the coverage. In short, risk factor holds the cost. It’s not just about how much risk you’ll possibly encounter, but it’s more on how much risk the company is gambling while granting you protection. So you may have an idea already that the higher the risk the insurer takes, the higher the premium you’ll have to pay. 

The insurer also determines a pool of high-risk individuals and low-risk individuals to make sure that business will keep going. Therefore, if there is an area where insurance companies cannot profit from the low-risk group, then the cost of a premium for the high-risk group will totally be a lot higher. 

Other factors that affect the cost of premium are as follows: the type of insurance and the coverage of insurance you need, the size of your deductible, and your personal data such as age, gender, location, health history, including other determinants that you may have a grip of control.

To understand more of the other factors involved, let’s take a look at them closer.

Type of Insurance and its Coverage

If you shop for insurance, you’ll definitely find a lot of it in the market. Even if you already have a specific insurance in mind, life insurance – for example, you’d still have a difficult time selecting since this insurance has subtypes (whole life and term). Depending on what subtype you choose, the cost of your premium is adjusted eventually. As you can see, insurance companies run their insurances into various options with different benefits it offers. If you opt to get more benefits from them or have complete protection, then expect to pay a costly premium. 

The Size of Deductibles 

Since wanting to be fully protected means paying expensively, there is another way in which you can save yourself from a high maintenance premium by selecting an insurance policy with higher deductibles. Deductibles are the percentage of expenses you pay by yourself deducted from your insurer’s share when you file a claim. 

Your Personal Data

Last but not the least, your background information also determines how much will be the cost of your premium. This includes where you live, the condition and type of property you own, your insurance history (e.g., number of claims you filed), your current health status (for health insurance) including your age and gender. Not to discuss age discrimination, but in reality, younger individuals are most likely to access a lower cost of insurance than older ones since they’re still much healthier and unlikely to make use of the protection more often.

Overall, premium is of different costs to different buyers. If you are a potential one, make sure to review the possible factors that may affect your contribution. Then again, shop, collect, and compare.