Accidental death and dismemberment insurance
Accidental death and dismemberment insurance (AD&D) is an policy that pays benefits to a beneficiary when the policyholder is involved in an accident that results in death or a serious injury.
Serious injuries include the loss, or the loss of use of, a limb, sight, hearing, and/or speech.[1] In the case of death by accident, AD&D insurance pays in addition to regular life insurance.[1]
Group coverage
AD&D is typically part of a company group benefit plan.
Employer paid AD&D premiums are considered a taxable benefit as a result of a change in the 2012 Federal Budget.[2]
Private coverage
AD&D insurance is also offered to individuals, on its own, or in addition to regular life insurance (as a rider).
However, in 2008, accidents were the fifth cause of death.[3] In 2018, transport accidents caused 0.6% of all deaths in Canada, while "other external causes of accidental injury" caused 4.0% of deaths.[4] In other words, in about 95% of deaths, AD&D insurance would not pay.
Further, privately purchased stand-alone AD&D is also quite expensive. In one example, a 30 year old female looking at $250k of coverage would pay $23 a month for AD&D insurance, but could instead pay $20 a month for 20 year term life insurance, or $28 a month for 30 year term insurance.[5]
Therefore, regular life insurance is typically a much better solution, as it covers almost all types of death[3], for a similar price to AD&D insurance.
See also
References
- ^ a b GroupBenefits.ca (a division of Park & Associates Insurance Agency Inc.), Accidental Death and Dismemberment, viewed April 11, 2020
- ^ 2012 Federal Budget Highlights — Group Benefit Plan Impact - Morneau Shepell, viewed November 19, 2013.
- ^ a b Garry Marr, Accidental death insurance is usually a bad investment, National Post, June 19, 2012, viewed April 11, 2020.
- ^ Statistics Canada, Deaths, by cause, Chapter XX: External causes of morbidity and mortality (V01 to Y89), Table: 13-10-0156-01, viewed April 11, 2020.
- ^ LSM insurance (an Ontario insurance broker), Accidental Death Insurance: What You Must Know before Buying it, viewed February 13, 2021.
Further reading
- Financial Wisdom Forum topic: "Accidental Death & Dismemberment Insurance"
External links
- "New 2013 Federal Tax Treatment of Accidental Death and Dismemberment Insurance Plans". Government of Canada. 2012-12-11.
- "Income maintenance plans and other insurance plans". Canada Revenue Agency. 2016-12-08.
