Whole life insurance and accidental death & dismemberment insurance (or AD&D as it is also known) do have certain similarities, one cannot replace the other. Life insurance provides your family with financial security in the event of your death barring some specific cases. AD&D insurance, on the other hand, falls under the types of insurance that offer limited coverage, only covering accidental death and injuries, and won’t provide any financial security in the event of death resulting from natural causes or illness.
The only overlap between the two types of coverage is that both payout in the event of accidental death. Generally speaking, at a comparable price point, life insurance coverage encompasses more causes of death than AD&D insurance’s limited coverage options.
The above notwithstanding, both have their own pros and cons, and some basic features to be aware of, and we’ll be going over the difference between life insurance and AD&D today in this article. If you’re deciding which type of coverage to opt for, then this article is perfect for you.
LIFE INSURANCE: BASICS, PROS, AND CONS
Life insurance is a way for you to provide financial protection to your family and loved ones in the event of your death. One pays premiums either on a monthly or annual basis, depending on the insurance provider you choose to go with. Named beneficiaries are given benefits under the policy, and it serves as an effective way of income replacement, allowing families to deal with financial responsibilities even after their loved one has passed away. Want to learn more? Check out our blog that discusses how much life insurance you might need.
There are two main types of life insurance. Term life insurance is the first, which provides coverage for a set period of time. Policyholders pay premiums for that set term and should the unfortunate happen during that time frame, then beneficiaries of the policy will receive associated benefits. The other type is whole life insurance, which is for a permanent term and remains active as long as premiums are paid.
If you have dependents, then this is the best option for you, but even then it would be best if you do a proper assessment. While there is no denying that a tax-free death benefit paid to your loved ones will offer a great deal of protection, it can be costly for people who are a bit older or those who have pre-existing medical conditions.
Life insurance also tends to be a more affordable option when compared to other similar products, but you need to be aware of your return before signing anything. Term insurance can be a good investment option, but if coverage and financial security for your family are your main concerns, then term insurance would be disadvantageous. Once the term is over, and you look to subscribe to another policy, you’ll be facing much more expensive premiums and probably lower payouts as well.
AD&D INSURANCE: BASICS, PROS, AND CONS
AD&D insurance is a type of policy that provides financial protection in the event of death or injury which is caused by accidents only, like car accidents, a plane crash, or a slip and fall. Therefore, your loved ones would not be receiving benefits if you were to die from natural causes such as illness or old age.
AD&D insurance also provides protection to the policyholder if there is an accidental injury or loss of limbs due to an accident. However, injuries and dismemberment will only result in a partial payout, whereas death from accidents will result in a full payout. It’s important you check these details if you’re subscribing to an AD&D policy and speak to an insurance broker in detail.
The foremost pro of AD&D insurance is that it offers additional protection on top of life and disability insurance. However, the coverage itself is quite limited in comparison to life insurance. Also, while AD&D insurance will pay benefits for injuries, it offers more supplemental protection than a standalone policy.
IS AD&D INSURANCE WORTH IT?
AD&D insurance will be able to provide you with some extra protection, such as for injury and dismemberment, which life insurance would not. As such it can be a good idea to supplement your life insurance with AD&D insurance to provide additional coverage.
However, under no circumstances should you consider using your AD&D policy as a substitute for permanent life insurance. Some will argue that if they are younger, then it makes more sense to opt for AD&D, as the chances of dying with natural causes at a young age are lower. This does not mean you use AD&D as a substitute for term life insurance either though.
AD&D policies are not whole life and you’ll be looking at a 20-year policy usually. This means that after 20 years you’re without protection and will need to opt for life insurance. However, if you subscribe to a life insurance policy late in life, then you’ll need to pay higher premiums. In fact, one of the biggest advantages of subscribing to a life insurance policy early in life is because premium payments tend to be quite low and you can lock that rate for life if needed.
AD&D VS. LIFE INSURANCE: SPEAK TO AN HALIFAX INSURANCE BROKER TO FIND OUT WHO WINS
The simple answer is that nobody really wins. It’s about what type of coverage you’re looking for and what kind of payout you’re expecting. When making decisions of such magnitude, it’s best to speak to an expert.
At McIver Insurance, you can speak to a whole range of insurance experts to assess your options and choose what is best for you and your loved ones. We’ll explain the benefits you can achieve through an accidental death insurance policy in contrast to other types of insurance, allowing you to make a decision that provides you and your family with comprehensive coverage. We have a wide range of accidental death plans available on our panel and we’re sure we’ll find the right one for you.
If you live in the Halifax, NS, area, then get in touch to talk about a financial protection plan from the best insurance companies and a comprehensive updated list of rates. Whether it’s life insurance, health insurance, or disability insurance, we’ll have all the answers for you.