There are several primary differences between life insurance and accidental death insurance. Accidental death insurance is actually accidental death and dismemberment, which will pay you money for loss of limbs, although not always for the full policy amount. While life insurance will typically cover all instances of death, accidental death and dismemberment insurance is extremely specific in what it will cover and what it will not.
There are two ways accidental death insurance can be purchased. If purchased as a stand-alone insurance policy, accidental death insurance normally will come with dismemberment insurance. Accidental death coverage can be added to your regular life insurance in the form of a rider so that your life insurance policy pays extra if you are killed in an accident.
A life insurance policy is designed to provide financial support in the event of the policyholder's death. A cash benefit will be paid to the beneficiaries named by the policy holder. Life insurance policies will pay for all causes of death, with the possible exception of suicide in the first two years of the policy. Accidental death and dismemberment insurance is self-explanatory in that the policy only pays out in case of accidental death or an accident that causes loss of limbs, loss of sight, loss of speech or loss of hearing.
To collect on an accidental death and dismemberment insurance policy it must be proven that the injuries were directly caused by an accident. Typically, no more than several months can lapse from the time of the accident to death or loss of limb.
Accidental death and dismemberment insurance will often exclude high-risk activities, such as skydiving or racing a motor vehicle, from being covered. Death caused by drug overdose, complications during surgery or mental illness may also be excluded from being covered.
Accidental death and dismemberment benefits vary between individual policies, but loss of one limb typically pays 50 percent of the policy amount, while loss of two limbs will pay the entire amount. Functions, such as hearing and speech, are treated as limbs for coverage purposes.
Because of the limited nature of death and dismemberment insurance, the website Insurance states that most people would be better off taking the money they would spend on death and dismemberment insurance and purchase additional life insurance with it.