What is AD&D Insurance?

The origin of Accidental Death & Dismemberment (AD&D) Insurance

By the mid-19th century, one of the greatest decades of railway development in Great Britain was ending. The once unmarred pastures of the English countryside were now crisscrossed by an enormous network of railway lines spanning nearly the entire length and breadth of the country. Freight could now be transported farther and quicker than ever before, and the British public almost immediately took to novel ideas like leisure travel and commuting to work.

As is often the case with the introduction of new technologies, there were hazards. By 1849, alarmed by the growing list of railway injuries and fatalities, the Railway Passengers Assurance Company (RPAC) was founded. RPAC established a system by which accident insurance could be coupled with the purchase of a train ticket, thereby effectively pioneering the first Accidental Death & Dismemberment insurance policy.¹ A decade later, American architect James Goodwin Batterson, who had been travelling in England, learned of RPAC’s accident insurance and sought to introduce a similar insurance product to the American market. Several years later, The Traveler’s Insurance Company was founded, and accident insurance officially crossed the Atlantic.²

AD&D Insurance has come a long way since its infancy as a type of situationally-specific travel insurance. Modern Accidental Death & Dismemberment policies offer more general coverage for a much broader list of accidents. The essential purpose and function, however, remain largely the same: to financially protect you and your family in the event of an accidental death or life-altering injury.

It’s worth considering how a life-altering injury might impact you and your loved ones. Would you still be able to earn an income having lost a limb, your eyesight, or your hearing? Would you be able to cover out-of-pocket medical expenses, home or vehicle modifications, or continue paying your bills?

The Statistics

According to the latest data from Statistics Canada, accidental or unintentional injuries are the fourth-leading cause of death in Canada.³ Further, and shockingly, for those aged 15 to 34, accidental deaths have consistently proven to the be the leading cause of death year-after-year since the beginning of the 2000s.⁴

Although unpleasant to think about, and not top of mind for working-aged Canadians, the statistics illustrate that the risk of dying from an accident is significantly greater than the risk of dying from a medical condition such as heart attack, stroke, and cancer.

But what about injuries? A 2018 report from Parachute, Canada’s national charity for injury prevention, found that for every 100,000 people in Canada, 167 people were disabled and 47 died as a result of an injury.⁵

Is Accidental Death & Dismemberment Insurance the same as Life Insurance?

A common misconception about Accidental Death & Dismemberment Insurance is that it is the same as Life Insurance, but there are several important distinctions and each type of coverage serves a specific purpose in protecting your financial wellbeing.

Although traditional Life Insurance is not without exclusions, it generally awards a benefit upon death regardless of the circumstances that lead to that death. Term Life Insurance provides coverage for a set period of time whereas Whole Life Insurance doesn’t expire. Life Insurance policies are often purchased as a means of providing a large nest egg to the insured’s beneficiaries upon their death.

Accidental Death & Dismemberment Insurance, by contrast and as the name suggests, provides a benefit payout when the death is the result of an accident, but also provides a financial safety net in the event of a life-altering injury. AD&D Insurance is often a complement to Disability Insurance (monthly income replacement benefits), with the AD&D policy providing a tax-free lump-sum payment that can be used for medical and rehabilitative expenses, home or vehicle modifications, and to help cover the costs of daily living while the insured person and their family adjust to accommodate any resulting lifestyle changes.

At first viewing, the comparatively narrow scope of AD&D Insurance, as opposed to the wider coverage afforded by Life Insurance, may appear to be a disadvantage. However, one of the primary benefits of AD&D Insurance is that it provides much-needed financial support while the insured person is still living, rather than only upon their death. AD&D premiums are also typically considerably lower than the cost of Life Insurance. Some AD&D premiums are as little as $6/month – roughly the cost of a cup of coffee.

Is AD&D Insurance worth it?

As the statistics demonstrate, younger Canadians are disproportionately affected by accidental death and injury, particularly if they work in hazardous occupations. What’s more, as a general rule, younger families are also more financially vulnerable and may be unable to bear the financial costs of unforeseen events – such as the loss of a loved one during their prime earning years – as easily as their older peers.⁷

Unlike older Canadians who may have already paid off their mortgages, paid down their debts, and accrued savings and assets, it is all too often the case that younger, working-age Canadians have little if any financial safety net should the worst occur. For those in this demographic, a lump-sum, tax-free Accidental Death & Dismemberment benefit could be a lifesaver, whether you’d like to pay off your mortgage, hire a live-in caregiver, pay bills, or simply take time off work to recover.

How much AD&D Insurance do you need?

As there are no restrictions on how your Accidental Death & Dismemberment benefit can be used, how much insurance you need is contingent upon your specific financial circumstances and obligations. Even as little as $50,000 of AD&D Insurance can go a long way in servicing your debts, covering your medical bills, or just keeping your family afloat as they navigate a difficult period in their lives.

How to find the best AD&D Insurance in Canada

When shopping for AD&D insurance, it’s worth bearing in mind that not all plans are the same. Some, like those offered by The Edge Benefits, are guaranteed-issue, meaning you won’t face lengthy underwriting processes, or the risk of your application being declined. Some insurers also offer single and family plans, the latter allowing you to extend a degree of your coverage to your dependents.

With The EDGE’s AD&D plans, there are number of additional baked-in benefits that you’re automatically eligible to receive as an Accidental Death & Dismemberment policyholder, such as the Home Alteration and Vehicle Modification Benefit, which pays for necessary improvements to your home or vehicle to make them more navigable and operable should a life-altering injury be sustained. It’s always worth inquiring what, if any, additional benefits you may be entitled to when looking for the right plan for you.

EDGE’s AD&D Insurance can be purchased by itself, but it’s especially powerful when paired with Disability Insurance. Not only would you receive a monthly income replacement benefit in addition to a tax-free, lump-sum AD&D payout in the event that you become disabled due to injury, EDGE’s plans automatically include an additional Accidental Medical Reimbursement Benefit of up to $100,000 under the AD&D policy after the $10,000 Accident Medical Treatment Benefit is exhausted under the EDGE Disability Insurance policy.

Sources

1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=263977
2. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=263977
3. https://www150.statcan.gc.ca/n1/daily-quotidien/231127/t001b-eng.htm
4. https://www150.statcan.gc.ca/n1/daily-quotidien/231127/t001b-eng.htm
5. https://parachute.ca/en/professional-resource/cost-of-injury-in-canada/the-human-cost-of-injury/
6. https://www150.statcan.gc.ca/n1/pub/84-215-x/2012001/hl-fs-eng.htm
7. https://www150.statcan.gc.ca/n1/pub/75-006-x/2023001/article/00002-eng.htm
8. https://parachute.ca/wp-content/uploads/2019/06/Cost_of_Injury-2015.pdf