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