Compensation for Death and Dismemberment
Thompson, Cynthia, Monthly Labor Review
Compensation for death and dismemberment
For the first time, the Bureau's Employee Benefits Survey reports on the details of accidental death and dismemberment benefits sponsored by employers
With the potential for incurring lost wages and large medical bills, accidents can create severe financial hardships for employees. To address these risks, employers may include accidental death and dismemberment (AD&D) policies as part of an employee benefits package. In this regard, AD&D benefits are a common feature of life insurance plans.
In 1988, 92 percent of full-time employees in medium and large private firms participated in life insurance plans, and 76 percent of those workers had AD&D benefits. (Less than 0.5 percent of employees had AD&D coverage without regular life insurance.) Unlike life insurance, AD&D insurance provides payment only for losses resulting from an accident--usually for injuries occurring on or off the job. In instances of accidental death, benefits are paid in addition to regular life insurance coverage and, in the large majority of cases, are equal to the regular benefit. For this reason, AD&D is sometimes called a "double-indemnity" benefit.(1)
Data in this article are from the 1988 Bureau of Labor Statistics survey of benefits for full-time employees in medium and large private firms. Information was obtained from a sample of 2,500 establishments representing approximately 107,000 business establishments employing 31 million full-time workers.(2) Data are published for all types of workers combined and separately for three broad occupational groups: professional and administrative, technical and clerical, and production and service employees. The first two groups are often combined and labeled white-collar workers, in contrast to the blue-collar workers constituting the third group.
How benefits are determined
Where AD&D coverage is provided, it is almost always a component of group life insurance. AD&D plans provide cash benefits to an employee in the case of dismemberment, such as the loss of a limb or an eye, and to a stated beneficiary in the case of death. Nearly all plan participants in the 1988 survey were covered for both accidental death and dismemberment; in a few cases, only accidental death was covered.
AD&D benefits are determined by the type of loss suffered. Plans generally specify a "principal sum" upon which benefits are based. This amount, usually equal to the amount of regular life insurance, will generally be paid for loss of life, both hands, both feet, the sight of both eyes, one hand and one foot, one hand and the sight of one eye, or one foot and the sight of one eye. One-half the principal sum will be paid for loss of one hand, one foot, or the sight of one eye, and in some instances, for loss of speech or hearing. Some plans have a provision that will pay one-fourth of the principal sum for loss of the thumb and index finger of the same hand.
AD&D plans often include several limitations on benefits. First, the loss must occur within a specified period of time after the accident. The most common time period is within 90 days after an accident, but certain plans allow up to 365 days from the accident. Second, the total payment for all losses due to any one accident may not be more than the principal sum. For instance, if an employee were to lose both hands and the sight of one eye, the total benefit would equal, but not exceed, the principal sum paid for the loss of just both hands, or equivalently, one hand and the sight of one eye. Finally, benefits are paid only for a hand or foot that is severed at or above the wrist or ankle, and for loss of sight that is total and irrecoverable.
Under certain circumstances, benefits are not paid at all. Coverage is not provided for losses resulting from or caused directly or indirectly by bodily or mental infirmity, disease, or illness of any kind; suicide or attempted suicide while sane or insane; an infection, other than a pyogenic (pus-producing) infection of an accidental cut or wound; taking part in, or as a result of taking part in, the commission of a felony; any act of war; or death due to drugs, unless prescribed by a physician. …