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Should I Purchase Accidental Death & Dismemberment Insurance (AD&D)?

Accidental death and dismemberment insurance was once a very popular product in Canada which was typically added as a “rider” to a life insurance policy. A rider is an add on to the policy… Basically an added or extra benefit that is not normally included with the standard life insurance policy.

Accidental death and dismemberment insurance does not pay out for all causes of death. As you can probably guess by the name of the insurance product, it only pays out if you die from an accident. For example, if you were diagnosed with cancer and passed away, your accidental death and dismemberment policy would NOT pay out. If you were in a car accident and died, the policy would pay out. There is also the potential for a payout in the event of a serious accident depending on the injury.

Since there are less ways for the policy to pay out, there is less risk the insurance company. As a result, less risk means lower premium. A lot of Canadians purchase (or used to) these types of insurance policies because the premiums (cost of the policy) was very minimal. Many would even buy these policies instead of purchasing life insurance because of the lower premium but it is definitely a bad decision to replace your life insurance policy with an accidental policy. Life insurance provides coverage for all causes of death except for suicide in the first two years of the policy.

More than likely you want your insurance policy to pay out for ALL causes of death and not just from an accident. Since AD&D coverage only pays out for accidents it makes much more sense to consider a life insurance policy instead because it provides much more comprehensive coverage. It is very inexpensive to purchase accidental death and dismemberment, but this should not be the reason why you would want to replace life insurance with it. Many banks provide AD&D coverage on loans such as credit cards, lines of credit, mortgages, etc.

I recommend taking the money that you are putting towards AD&D coverage and just purchase an actual life insurance policy (such as a term life insurance policy) instead. Wouldn’t you want the peace of mind knowing that you are covered for all causes of death rather than just accidental death? At the end of the day you need to consider your reasons for purchasing insurance and determine what product best suits your needs. We are here to help with any questions that you may have.

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