Monday, September 26, 2016

Is Group Accidental Death & Dismemberment (AD&D) Worth It?

Many group term life insurance plans offer employees the opportunity to purchase group accidental death & dismemberment insurance. AD&D benefits can be added as an attachment to basic life and supplemental life insurance or as a separate standalone AD&D plan.

In this article, I go over what group AD&D is and whether or not you should buy it.

Option 1 - Included in the Underlying Group Term Life Plans

Many times the accidental death & dismemberment is added to the underlying group term life plans. This means in order to get AD&D in those type of plans, you have to participate in the underlying plan. If you do participate, the AD&D benefits will be equal to the underlying group term life insurance amount.

EXAMPLE: You have $40,000 of basic group life insurance that includes an AD&D option. You die in an auto accident. Your beneficiary would receive the $40,000 of basic group life insurance PLUS the $40,000 accidental death benefit.

Option 2 - Purchased as a Standalone Benefit

The other way group AD&D is sometimes offered is as a standalone benefit. This means that you can buy the AD&D even if you don't buy the underlying group term life insurance plan. If you are participating in the group term life, your AD&D plan can be for an amount that might be completely different than what you have for basic or supplemental life.

A standalone AD&D plan is guaranteed issue, so you can pick it up even if you have medical problems and can't qualify for life insurance.

Premiums are also based on the amount of the AD&D you buy and not based on your age.

Remember AD&D Pays for Accidents Only

Keep in mind that AD&D benefits only pay if death or dismemberment was due to an accident. If you die or have dismemberment due to an illness, no benefits will be paid.

It's more common than you think for people to get confused about the kind of life insurance they have. The premiums for AD&D are a lot cheaper than for "real" life insurance, so sometimes people buy it because it's cheap or because they were otherwise uninsurable. It's not until they die of illness that their beneficiaries find out that no benefits are paid.

It's more likely that you'll die of an illness than an accident. Make sure that any AD&D benefits you purchase in a standalone AD&D plan are above and beyond additional life insurance you already have and not in place of it.

Learn more about what is considered accidental death for insurance purposes.

Sample Group AD&D Schedule of Benefits

Here's a sample schedule of AD&D benefits:

  • Loss of life: Principle sum
  • Loss of two or more members: Principle sum
  • Loss of speech and hearing: Principle sum
  • Loss of one member: 1/2 Principle sum
  • Loss of speech or hearing: 1/2 Principle sum
  • Loss of thumb and index finger of the same hand: 1/4 Principle sum

In addition to the schedule of benefits, there may be additional payouts for family members and for things like wearing your seatbelt if you were in an auto accident. You'll have to check your employer's plan because every plan is different.

Should You Buy a Standalone Group AD&D Plan?

From an actuarial point of view, AD&D probably isn't likely to ever pay a benefit for you. If you have adequate life insurance and want to buy some AD&D on top of that, there are worse things people waste their money on. 

If you travel a lot for your job or are involved in other risky activities, there's certainly nothing wrong with picking some up. You might want to check your group's policy for any exclusions.

A lot of employees will opt to allocate a buck or two and there's certainly nothing wrong with that approach if you want to do that too. Just don't waste a ton of money on AD&D.


Accidental death & dismemberment is an option that many employers have either built into their standard group life rates or as a standalone plan.

Just remember it's more likely you'll die of natural causes instead of an accident. Be sure you know what you are buying when you are buying AD&D and that it will only pay out for accident related claims.

Let me know in the comments what you think about AD&D and what you've seen in employer groups.

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Michael is a champion of guaranteed issue for employees in the workplace. He's been an insurance agent since 1992 and has worked with thousands of employees.