What is Term Life Insurance?
Term life insurance may provide for the payment of a death benefit to a designated beneficiary should the insured die during the specified term.1 Unlike whole life insurance, term life insurance may not accrue cash value. For this reason and others, term life insurance is typically more affordable than other life insurance policy options, making it a common choice for a wide range of employers.1
Term life insurance is designed to offer a one-time, lump sum payment to the beneficiary of the insured in the event of their death in what is known as a death benefit.1 Term life payouts do not require that the insured die in any specific way.
What is AD&D Insurance?
Accidental death and dismemberment (AD&D) insurance provides coverage should the insured suffer covered accidental death or dismemberment.2 Often applied as a rider to an existing health insurance or life insurance policy,2 AD&D is commonly offered by employers in addition to other coverage options.3 However, while AD&D has its benefits, AD&D is also known to have extensive coverage limitations.
Accidental Death
Like term life coverage, AD&D policies typically pay a death benefit to the beneficiary in the event that the insured accidentally dies.2 However, the key word here is “accidentally,” as AD&D policies only pay a death benefit in the event that the insured dies in what the policy considers to be an “accident.”3 In addition, some AD&D policies may not provide a death benefit to the beneficiary in the event that insured dies while partaking in a ‘high-risk’ hobby (e.g. scuba diving, sky diving, and free climbing). For these reasons, it’s vital that you have a clear understanding of what is covered under your AD&D policy, as failing to do so can risk a death benefit paying to your beneficiaries.
Dismemberment
Unlike term or whole life insurance options, AD&D offers coverage in the event that the insured suffers dismemberment. While the covered injuries differ with each insurer and policy, AD&D provides a benefit to those suffering dismemberment, and in some cases, may even provide coverage in the event of loss of speech, loss of hearing, and different forms of paralysis.2
Conclusion
Term life and AD&D do very different things and have nuances to what they cover, that said, AD&D can often be attached as a rider to a term life policy. As such, it is worth noting that while these policies differ, you don’t necessarily need to choose between one and the other to get what you need.
- Investopedia, Term Life Insurance, 2019
- Investopedia, Accidental death and Dismemberment Insurance (AD&D), 2019
- ValuePenguin, What is Accidental Death and Dismemberment (AD&D) Insurance?, 2019
Categories: Life Insurance, Term Life Insurance