When it comes to getting life insurance, there are different choices out there which can make it difficult to choose the right one for your needs. Especially for young people, choosing between term life and accidental death & dismemberment may be a difficult one without understanding what they are and their differences.
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Table of Content
What is Term Life Insurance?
Term life insurance covers your beneficiary with a pre-determined amount of benefits in case you should pass away within the time frame of the coverage. Unlike whole life, term live has a specific time limit in which the coverage is enforced. However, it is also considerably less expensive than whole life insurance for the same amount of benefits that are provided. Read here more about term life policy and its advantages.
Term life is very popular and works well with all age groups as it provides inexpensive coverage for loved ones in case something should happen to you.
What is Accidental Death and Dismemberment Insurance?
Accidental death and dismemberment is a form of insurance that only pays if the cause of death is determined to be from an accident. In addition, the policy will also pay if the person loses a limb, sight or becomes paralyzed due to an accident. Such insurance may also cover fingers and toes as well. Depending on the insurance company, there may be different packages that they utilize for those who want this type of insurance.
Quite often, they are provided by employers as a benefit in case the worst should happen to an employee. It is often part of a group insurance plan.
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There are four general types of this insurance that are available;
- Group Life
Group life policies will have AD&D insurance as part of their overall plan, especially if this insurance is purchased by the business as part of covering their employees in addition to workman’s compensation. Many travel insurance plans will have this form of insurance as well in case something happens on business trips or company excursions.
Voluntary is a separate form of AD&D that provides elective benefits to the individual while dependents are usually additions to the standard plan that cover an employee’s family. However, such insurance can be purchased independently if so desired.
Term Life vs. AD&D:
When it comes to selecting which insurance is best for your needs, there are some considerable differences between the policies. Generally speaking, term life insurance offers far greater coverage, but is generally more expensive than its AD&D counterpart. However, there are limitations to the AD&D coverage that may not make it the right choice for your needs.
Obviously, if AD&D is part of your employer’s plan where you are automatically enrolled, then you’ve already chosen that form of coverage. However, if you are considering this form of insurance as a rider or addition to your individual policy, then you’ll need to be aware of what it can provide for you.
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Cost: This is a variable factor as AD&D is most often used as a rider on another insurance plan. In fact, a large portion of people who have either group or individual coverage will have AD&D added on as a rider to that plan for an extra expense per month.
For stand-alone policies, it is possible to get upwards of $250,000 for just $10 a month for AD&D depending on your age and risk factors. Term life insurance for the same amount coverage is generally two to four time or more expensive again depending on the age and risk factors of the person being covered.
On the surface, AD&D is certainly a substantially cheaper policy to purchase than term life. However, there are other differences that need to be considered starting with your age, number of dependents and the risk factors involving your occupation. For example, if your line of work puts you in danger of dying or losing a limb to an accident such as working in manufacturing around large machines, then your AD&D coverage may cost considerably more.
Term Coverage: In choosing between term insurance or AD&D, term is far broader as it covers most form of death. Even young people can pass away from diseases and other causes that are not accidental, so that consideration will have to be taking into account.
AD&D Coverage: What this form of insurance does provide as a rider to your existing life insurance plan is the ability to cover certain types of serious injuries that may not otherwise have any coverage. For example, if you lose a limb while in an automobile accident away from work, your workman’s compensation may not cover such a loss. Also, since you did not pass away your general life insurance plan is not effective either. However, having the AD&D benefit this particular case as will provide the coverage that is needed.
Defining Accidental Death: Since AD&D insurance riders generally pay twice the amount for the policy coverage, insurance companies are often wary of paying it if the cause of death cannot be proven beyond a certain degree that it was accidental. There are cases of insurance companies disputing cases in which the cause of death cannot be fully determined by the coroner. So, this means that if there was some question to how the deceased met their fate, it may result in the AD&D coverage not paying off.
Which One is Right for You?
When choosing between term life and accidental death and dismemberment, it is important to remember that the overall benefits make term a far more palatable policy. Term will pay for most forms of death and will provide a healthy amount of benefits while having a low, affordable cost. AD&D however may be less expensive in certain ways, but the overall benefits are far narrower in scope. It is true that if you pass away from an accident, the benefits can be much greater, but the odds are really against you even for younger people. So, term life insurance is the one that you should really consider for you to cover your family in this time of grief.