Accidental death and dismemberment (AD&D) insurance pays a plan-defined amount as a lump sum after a covered accidental death or a listed accidental loss.
In our content team’s review of accidental death and dismemberment insurance in Canada, we used the federal Public Service Management Insurance Plan booklet, and British Columbia’s public-service AD&D regulation to learn more about AD&D benefit schedules and common exclusions. To better understand AD&D insurance and how it differs from disability and life insurance, our team used the Financial Consumer Agency of Canada’s life-insurance guide and FCAC’s disability-insurance guide.
Keep in mind AD&D insurance is narrower in scope than life insurance and doesn’t replace income the way disability insurance can.
AD&D Insurance Explained
An AD&D insurance policy identifies a principal sum and a schedule of covered losses. In case of a covered accident that leads to death, the principal sum may be paid to the beneficiary. A covered loss such as a hand, foot, sight, hearing or paralysis may pay a stated percentage. To be covered, the accident, loss, timing, and any exclusions must meet the requirements of the AD&D certificate of coverage.
What Does AD&D Cover?
| Benefit type | Core or plan-specific? | What to verify |
|---|---|---|
| Accidental death | Core | How the plan defines accident, the loss period and exclusions. |
| Scheduled dismemberment or loss | Core | Which body losses qualify; the exact definition of loss; percentage payable for each loss. |
| Paralysis, sight, speech or hearing | Often scheduled, but percentages vary | Exact definitions, covered combinations and maximum per accident. |
| Hospital or rehabilitation | Plan-specific | Daily amount, waiting period, duration and eligible expense. |
| Education, childcare or family benefits | Plan-specific | Eligible recipient, proof, amount and deadline. |
| Workplace or home modification | Plan-specific | Covered work, prior approval and expense limit. |
When Should You Consider AD&D Insurance?
Think about the financial problem first. If people depend on your income after death from any cause, consider life insurance. If you need income while illness or injury keeps you from working, compare disability coverage.
AD&D coverage is much more limited and pays a lump sum only for a covered accident. Many disabling conditions and most deaths would not trigger a claim. If you’re exposed to unusual risks in your occupation or personal life, make sure that the activity or occupation is not specifically excluded in the certificate of coverage.
If your employer offers AD&D coverage at no or nominal cost, be aware of what happens to your coverage when employment ends. Find out who pays premiums when you’re on leave, whether coverage can continue or be converted and what triggers an end of coverage for dependents.
Read More: See How Critical-Illness Insurance Covers a Different Risk
AD&D, Life And Disability Insurance Compared
| Coverage | Typical trigger | Payment form | Main limitation |
|---|---|---|---|
| AD&D | Covered accident causes death or a listed loss. | Scheduled lump sum | Disease, natural causes and non-listed losses are generally outside the trigger. |
| Life insurance | Death while coverage is in force, subject to the contract. | Death benefit | It does not normally pay a living benefit for loss of a limb or inability to work. |
| Disability insurance | A covered illness or injury that meets the plan’s definition of disability. | Ongoing income benefit, subject to limits | Waiting periods, benefit periods, offsets and definitions of disability vary from policy to policy. |
Read More: Compare AD&D and Accident Coverage With Life Insurance
How Are AD&D Benefits Calculated?
Note that no single payout table applies to all Canadian AD&D insurance policies. Different plans use their own percentages and definitions for qualifying losses. Some schedules cap the total at the principal sum when several listed losses result from one accident.
Read More: Compare Life Insurance Options
To determine the benefit for one qualifying loss: Principal sum insured multiplied by the scheduled percentage.
For example, the federal Public Service Management Insurance Plan provides the following AD&D benefits: The plan lists 50% of the principal sum for loss of one hand or one foot, 75% for one arm or one leg, and 100% for specified paralysis.
This is an example of one Canadian government plan and should not be construed as indicative of all plans. Under that federal plan only, a $200,000 principal sum and a qualifying loss of one hand could produce a scheduled amount of $100,000 before any other contract issue.
Keep in mind there may be other considerations in your insurance contract before finalizing your payout. Always check the terms and conditions of your certificate of insurance.
AD&D Exclusions And Limitations
Check the exclusions in the certificate. For example, in government plans, AD&D benefits are not payable for losses associated with disease, illness, war, suicide or intentional self-injury, certain aircraft or criminal circumstances. Private or group plans may word their exclusions differently and may have additional exclusions. Carefully review the exclusions in your plan.
What Are The Limits Of AD&D Insurance?
Two AD&D policies may have the same principal sum but use different percentages for various losses or end coverage at different ages, so compare their certificates carefully.
The biggest limit of AD&D insurance is its trigger. Serious accidents that result in substantial medical bills, lost time from work or bodily pain may not trigger a benefit. No benefit is provided unless the policy lists that particular loss.
While a death from a disease wouldn’t trigger AD&D insurance, the financial burden for the family would be the same as a death by accident. Low costs don’t overcome this limitation.
How To Make An AD&D Claim
Myth: All Canadian AD&D policies use a 30-to-90-day claim-filing rule.
Fact: Each certificate is different. Act promptly and follow the notice and proof provisions set out in your certificate. Keep copies of all correspondence and documents submitted and keep a log of all communications, noting the date, person contacted and a summary of the conversation.
Notify the insurer or plan administrator as soon as reasonably possible that you intend to make an AD&D claim. Ask for a claim form, the exact proof and deadline required by the certificate.
Submit the required claim form and proof, ensuring the submission includes:
- Policy or group-plan information
- Claimant and beneficiary information
- Accident and covered-loss records, such as medical and hospital reports or police and coroner documents where applicable.
Ask for acknowledgement of receipt and ask them to confirm in writing whether or not all required information has been received.
If a claim is denied, request in writing:
- The insurer’s decision;
- The part of the policy they are relying upon to deny your claim;
- The appeal/review process.