Accidental Death & Dismemberment Insurance (AD&D) is an employee benefit that, by our own admission, doesn’t get much profile. That’s not because it’s not a great benefit – it’s largely because it’s almost always paired with Life Insurance.
Why? Well, like good wine and cheese, they just work well together. AD&D and Life Insurance each fill in the other benefit’s gaps in coverage and, when combined, create more comprehensive coverage in the case of an accident or loss of life.
We get a fair amount of questions about AD&D, so we thought we’d do a two-for-one and give the benefit a bit of love and take the opportunity to answer the most common questions.
What is Accidental Death and Dismemberment Insurance?
Accidental Death and Dismemberment Insurance (AD&D) provides financial assistance and support for covered employees in the event of bodily harm or loss of life as the result of an accident. AD&D is sometimes referred to as “catastrophic insurance” or “catastrophic coverage” because it covers major accidental injuries, but we think this is a bit of a misnomer. (See Benaccount® for what we think of as “catastrophic insurance”).
What do AD&D plans cover?
Specific coverage and policy wording varies between carriers; however, generally speaking, AD&D provides coverage for:
- Loss of limb
- Loss of hands, feet, fingers or toes
- Loss of sight or hearing
- Loss of life
- Total or partial paralysis
Additionally, AD&D provides other support and financial assistance beyond the above. For example, our AD&D benefit, provided through Industrial Alliance (iA Financial Group), includes*:
Funeral Expense Benefit. If an injury results in loss of life, an additional amount is payable for funeral expenses incurred, up to $5,000.
Rehabilitation Benefit. If an injury requires special training to qualify for a special occupation, the reasonable and necessary expense incurred for such training will be paid, up to $15,000.
Bereavement Benefit. If an injury results in loss of life, this benefit provides six sessions of grief counselling for Spouse and/or Dependent Children, up to $1,000.
*Benefits and maximums are subject to change.
How much does it cost?
Pennies. No, actually! AD&D is a fairly inexpensive benefit due to the low risk of a claim and the varying payable amounts depending on the nature of the claim. Because of this, AD&D is an easy add-on to the Life Insurance benefit to provide additional security and peace of mind.
The monthly premiums paid are based on the total volume payable under the Life Insurance rate. For example, a company with ten employees with $10,000 of Life Insurance coverage each, have a total volume of $100,000. Using BBD’s own AD&D rate of 0.039** as an example, the total monthly premiums paid by the employer would be $3.90, and each individual employee’s premiums would be only $0.39. Here’s the math to back it up:
Monthly Group Total: $100,000 x 0.39 ÷ 1000 = $3.90
Monthly Employee Total: $10,000 x 0.039 ÷ 1000 = $0.39
Multiply those amounts by twelve and you’ve got the total annual cost to employers ($46.80) and individual employees ($4.68) to provide that extra layer of protection and peace of mind.
**This rate is subject to change and may differ based on industry or occupation.
How much is my [insert body part here] worth?
It’s a bit morbid, but it is a common question. The amount of coverage will vary by carrier, but here are some of the amounts payable from our own AD&D benefit***:
- Total paralysis of both lower limbs, one side of the body, or all four limbs: 200% of principal sum amount
- Loss of life, eyesight in both eyes, or both hands or both feet: 100% of the principal sum amount
- Loss of one hand or one foot, speech, eyesight in one eye, or hearing in both ears: 75% of principal sum amount
- Loss of use of one hand, foot, arm, or leg: 75% of principal sum amount
- Loss of hearing in one ear: 25% of principal sum amount
We know people want to understand their coverage, and sometimes that means putting a price on things you’d rather not put a price on. Just don’t do what these folks did (warning – pretty crazy, yet strangely interesting read).
***Subject to change.
I already have Life Insurance, why do I need AD&D Coverage?
Group Life Insurance provides financial assistance in the event of a loss of life. AD&D provides assistance for bodily harm which can severely impact your life and ability to work, such as the loss of a limb, partial or total paralysis, eyesight or hearing.
AD&D Insurance supplement Life Insurance nicely, and because the two often work from the same principal amount, it just makes sense to take both. Pair that with its significantly low cost, and you may find yourself asking, “Well, why wouldn’t I add it?”
What happens if I pass away and have both Life Insurance and AD&D?
In cases where death is accidental, each benefit would be payable. Since Life and AD&D Insurance are often quoted together and with the same principal amount, the total amount payable is easy to determine. For example, if your Life Insurance benefit is $25,000, your AD&D would (generally) be the same, totalling $50,000 paid to your designated beneficiary.
When Life Insurance is offered as a percentage of salary (example: x2 annual salary of $50,000/year), with AD&D generally x1 annual salary, the calculation changes a bit:
Life Insurance: $50,000 x2 = $100,000
AD&D Insurance: $50,000 x1 = $50,000
Are all industries and occupations eligible?
Coverage varies by the insurance company, but as an example, our own AD&D benefit is available to all. However, those in some industries are subject to an increased rate, based on risk.