What Is The Difference Between Term Insurance And Accidental Death Insurance?

Term life insurance and accidental death and dismemberment (AD&D) insurance are two different types of coverage, and the biggest difference between them is what they cover. While term life insurance provides coverage for any cause of death, AD&D insurance provides coverage only if the death or injury is caused by an accident. Here’s a closer look at each type of policy:

Term life insurance

Term life insurance pays out a death benefit to your beneficiaries if you die within a specific time period, regardless of the cause of death, with some exceptions. Here’s a table that shows what is and isn’t covered by term life insurance:

Reason for claim	Term life	AD&D
Death due to illness or disease	Yes	No
Death from an accident, like a car crash	Yes	Yes
Death from drug overdose	Yes	No
Death from drunken driving (by the insured)	Yes	No
Death from suicide	Yes (if the policy has been in effect long enough, usually two years)	No
Loss of eyesight, hearing or a limb	No	Yes (depending on the injury, you may receive a partial payout)

Term life insurance policies have a specific term length, usually ranging from one to 30 years. If you die after the term ends, there is no payout because the policy has expired. However, you can purchase a new policy at the end of your term, but you can expect to pay higher rates because you’ll be older, and they may be even more expensive if you develop any medical conditions.

Accidental death and dismemberment insurance

Accidental death and dismemberment insurance can be purchased as a stand-alone product or as a rider on a life insurance policy. Unlike term life insurance, AD&D policies pay out only if you’re killed or injured in an accident. Here’s a closer look at AD&D insurance:

• AD&D policies pay out only for death or dismemberment caused by an accident
• AD&D policies often exclude deaths due to high-risk activities such as skydiving or car racing
• AD&D policies exclude deaths caused by a drug overdose, drunken or drug-impaired driving by the insured person, war, mental illness, suicide and certain other circumstances
• Payouts for partial injuries, such as losing your sight in one eye, are generally only a portion of the full benefit

While AD&D insurance can be a good supplement to life insurance, it may not be worth the money for everyone. If your goal is to provide your family with a financial safety net regardless of how you die, life insurance is the right purchase.