Understanding accidental death and dismemberment insurance

I remember as a child being fascinated with a brochure the school gave us to bring home to our parents—it was an Accidental Death and Dismemberment (AD&D) brochure. I was shock­ed and amused at how much my body parts were worth if I lost them in an accident. Today as an insurance advisor, I still think that the sound of AD&D is somewhat macabre, but I also see there is a definite place for this benefit in many families’ insurance portfolio.

AD&D is designed to help protect individuals and their family against the financial burden of an unforeseen accidental injury or death. A tax-free lump-sum benefit is paid for covered losses occurring within 365 days of an accidental injury.  

AD&D pays 100% of the benefit level you choose upon an accidental death, 200% of the benefit level if you become paraplegic, and a percentage of up to 100% of the benefit level upon the irrevocable loss of use or physical loss of certain areas of the body. If you were diagnosed with an illness that would severely impact your life, you may have some time to prepare emotionally and financially for the burdens ahead. An accidental injury could happen when you least expect it, and there may be no time to rearrange your finances.  

AD&D would provide a lump sum for your or your family’s discretionary use that would be paid in addition to any disability or life insurance benefits.  Under the family AD&D plan, your spouse and dependent children would be covered for a portion of your benefit level.

There are many additional benefits of AD&D insurance that supplement the basic benefits.  For example, there are designated benefit amounts for:
• Alterations to your home or vehicle if you permanently require a wheelchair.
• Day-care expenses for children under age 13.
• Funding dependent children who are attending postsecondary education.
• Rehabilitation funding if you or your spouse require special training to engage in a new occupation.

The cost of BCMA AD&D is very competitive—$500000 coverage for a family costs $180 per year regardless of age—and there is no underwriting. Premiums reflect that AD&D covers accidental death and qualifying injuries only, which differs from life insurance that covers almost all causes of death. According to BC Vital Statistics, there were 6450 accidental deaths in the past 5 years, with car accidents and accidental falls as the leading causes. 

In 2009, unintentional external factors caused fewer than 3% of all deaths in BC, but external factors accounted for 39% of deaths among 25- to 44-year-olds (39% of deaths of 25- to 44-year-olds were caused by external factors, which may have been intentional or unintentional). 

AD&D should supplement, not replace, life insurance so that your family is financially protected from the extra costs associated with an unforeseen accident. It also ensures that you have adequate disability coverage for your monthly living expenses if an accident prevents you from working. 

Is AD&D insurance right for you? If you have a young family, AD&D provides extra financial protection at a reasonable cost that would cover you, your spouse, and dependent children. Take advantage of the no underwriting feature that automatically qualifies applicants for coverage. For members who are uninsurable for life insurance, AD&D can be a good alternative that provides income replacement upon death. 

The BCMA AD&D policy also covers adult dependent children who are mentally or physically handicapped and who probably could not get insurance elsewhere. 

Active and adventurous people who enjoy skiing, diving, rock climbing, and other sports may be more prone to accidents, but there is no extra premium rating (cost) that you would often find with other policies. If you have a spouse working in a higher risk occupation like a machinist or construction worker, you may want to have a family policy to cover him or her as well. 

As physicians you have likely witnessed the aftermath of an accidental injury or death and can appreciate the financial challenges these accidents may bring upon a family. If you overlook the grimness of some of the AD&D policy details you can start to understand that this coverage can be an important supplement to a healthy insurance portfolio.

For a review of your insurance portfolio, please contact Julie at 604 638-8745 or e-mail jkwan@bcma.bc.ca.
—Julie Kwan, BBA, GBA, CFP, CLU
BCMA Insurance Advisor