Accident insurance, or what is commonly known as “accidental death and dismemberment insurance” or AD&D, is the form of coverage that offers protection if a death of an insured person should be caused by an accident. If this occurs then the policy will pay out an agreed upon amount of money that helps the designated beneficiary. Contrary to many other types of life insurance, there is no aspect of this coverage that has an investment or savings component and it is usually an add-on to life policies that is made available through an employee benefit program.
Under the policy terminology, an accident is generally defined as a sudden and unexpected event that causes disability or death without an intention behind said event. It's considered an event that is both unforeseen and unlikely to happen in the first place.
AD&D coverage will have its own exclusions for claims that result from events that do not fit the description of an “accident”. These would include such things as war, natural disasters, a suicide or and kind of death or dismemberment that comes from the usage of illegal drugs or alcohol intoxication. Each policy will specifically lay out these exclusions for your consideration.
Benefits are paid out by the insurance company fractionally for such things as blindness or the loss of a body part resulting from an accident. Even when one becomes paralyzed, he or she will be covered under some of these policies, but keep in mind that many won't cover dismemberment that occurs below the ankle. Policies will delineate what percentage of the total value will be paid-out for partial dismemberment and it always will be defined under each policy, so be sure to familiarize yourself with the details.
What is known as “double indemnity” kicks in if an accidental death occurs as outlined in the AD&D policy. It is a benefit that is provided in addition to any life insurance that the policyholder may have been covered by. Double indemnity is usually paid out even if the life insurance and AD&D coverage were made available by the same company. Life insurance policies will also have their own set of definitions for double indemnity.
These AD&D policies will give a set amount of time within which a death must be the result from an accident in order to receive benefits and it must be a direct result of any injuries sustained from the accident.
Though accidental death isn't necessarily perfect for everyone, it is often a valuable offering in an employee benefit plan.