AD&D: What Employers and Employees Need to Know

Many employers offer Voluntary Term Life insurance and Voluntary Accidental Death & Dismemberment (AD&D) insurance as a part of their employee benefits package. But are you confident your employees understand the difference between the two? AD&D is relatively inexpensive in comparison to term life insurance. On a group basis, you can often find AD&D rates under three cents per $1,000 of coverage, whereas most group term life rates start at double that. When rates are age based, the cost difference between group term life insurance and AD&D is even more apparent. 

Some employees may be tempted to “load up” on AD&D for the very reason that the premiums are so comparatively low. Before making that choice, employees should consider the following:

• AD&D only pays the full schedule amount in the event the death is due to an accident.
  • Death by sudden illnesses, such as a heart attack or stroke, are certainly unexpected but are not accidents. Simply put, death by heart attack is not payable under AD&D.
• Comparing the top 10 causes of death in 2017, accidents were responsible for just six percent of deaths(1), with males having a higher percentage of deaths in this category than females (see Figure 1).

However, age plays a significant factor on cause of death(2).An individual’s odds of dying by accident (i.e. unintentional injuries) drops dramatically from age cohort 25-44 (34.6%) vs. age 45-64 (8.8%).As one may expect, the two leading causes of death in the 45-64 age category are Cancer (28.4%) and Heart Disease (20.8%) respectively(3).Deaths caused by cancer and heart disease are not payable by AD&D policies.

What employers can do to help

Some employees may rely too heavily on AD&D coverage without understanding the implications of that choice. Focus on your plan design and employee education to help bridge that knowledge gap.

Focus on your Plan Design. Ask yourself: How do you want your voluntary life and AD&D policies structured?  Do you want employees to be able to elect Voluntary Life and AD&D independently of one another?  There are pros and cons to all scenarios:

• Pros:  This offers the most benefit choice for employees. 
• Cons:  Lots of choice isn’t always the best strategy; are employees potentially over insuring on AD&D without understanding when AD&D will pay.

Conversely, should you administer your plan so that employees are making a single Voluntary Life and AD&D election?  Does your benefits administration system have a limitation on the plan design it can accommodate?

• Pros:  This choice is arguably the simplest to administer and communicate.
• Cons:  This arrangement offers little flexibility for employees in different life stages to adjust life and AD&D coverage based on their individual needs. 

Don’t overlook employee education as a solution. Regardless of the plan design arrangement you choose, employee education is key. Be sure it’s clear in your enrollment and education materials exactly what the differences are between AD&D and life insurance. Consider doing a few drip campaigns in the weeks leading up to your annual enrollment. As with every important decision, it’s critical that employees take their lifestyles and life stages in to consideration as they are prioritizing their insurance spend. 

Need more assistance?
Your Marsh & McLennan Agency team is available to help you with both plan design recommendations and employee education. Reach out to your local MMA Employee Health & Benefits consultant for assistance.

1 Heron Ph.D., Melonie. “Deaths: Leading Causes for 2017.” National Vital Statistics Reports, vol. 68, no. 6, 2019, p9.  

2 Ibid, p11.  

3 Ibid.