A Quick Guide to Accidental Death and Dismemberment (AD&D) in Canada

By: Updated: July 8, 2021

You have almost certainly heard the phrase, "expect the best but prepare for the worst". It's popular for a reason. Accidental death and dismemberment would definitely be some of the worst situations we could encounter, so why not prepare for it?


What is Accidental Death and Dismemberment (AD&D) Insurance?

It is just as it sounds, financial insurance that pays out for accidental death and or dismemberment/loss of function of the insured. 


Should I Get AD&D Insurance?

Everyone will hear of an accidental death and or dismemberment at some point or another. It really happens. When this occurs, it is not only awful, but it is also sad. What is even sadder is the fact that the bills are waiting there afterwards.

This is the reason why so many people become interested in and purchase life insurance. AD&D insurance is similar in the case of accidents or death resulting from a covered accident. A death or dismemberment benefit will help in easing the additional stress from those specific bills. 


What is Covered Under AD&D Insurance?

AD&D insurance will not cover death or dismemberment from natural causes or illnesses, however, if the insured happens to pass away or becomes dismembered in an accident that is not foreseen, then they will receive a payment from their AD&D policy.

Examples of these types of accidents could be any of the following and more:

  • exposure to extreme weather

  • traffic accidents

  • falls

  • drowning

  • homicide. 


AD&D Payout

Every insurance policy is not the same, however, they usually pay out similarly. For example: If the insured dies, their beneficiary will receive a lump sum if the death is a direct result of an accident that is covered by the insurance.  

When the insured person suffers from dismemberment/loss of function and lives, they will receive what is called living benefits. As previously stated, the percentage of policy payout will differ, but a certain percentage of the policy will be paid out based on the type and extremity of the dismemberment or loss of function.


Is AD&D Insurance Tax Deductible?

AD&D insurance is only a deductible expense in Canada when paid to employees on behalf of an employer. This can be referred to as Group AD&D insurance. In this case, the employer will pay the CRA (Canadian Revenue Agency) both CPP and EI premiums. They will deduct this from what they pay employees and will remit these amounts to the CRA. When AD&D insurance is paid for as an individual, the expense is not tax-deductible.


Accidental Death and Dismemberment vs Life Insurance

AD&D insurance pays out for dismemberment, loss of function and death caused only by certain instances. Life insurance, on the other hand, will pay for most instances of death.

Preparing for the worst won't make it completely unavoidable, however, it could put you in the best position possible while dealing with the situation.


Are you incorporated in Canada?

Small business owners and incorporated individuals in Canada can use a Health Spending Account (HSA) to save on their medical expenses. An HSA is a cost effective alternative to traditional health insurance. The plan covers a wide variety of health and dental expenses. You could save thousands of dollars in taxes with an HSA.


Find out more about Health Spending Account (HSA), download my free guides:

Download the HSA Guide for Incorporated Individuals

Download the HSA Guide for a Business with Staff

Write off 100% of your medical expenses

Are you an incorporated business owner with no employees? Learn how to use a Health Spending Account to pay for your medical expenses through your corporation: 

Download the HSA Guide for Incorporated Individuals

Do you own a corporation with employees? Discover a tax deductible health and dental plan that has no premiums:

Download the HSA Guide for a Business with Staff

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