Semantics are supremely important in making or breaking certain lines of insurance.

Case in point: accidental death and dismemberment policies, known as AD&D.

Some people might actually be put off by the gruesome term "dismemberment," observes Ron Neyer, assistant research director for Windsor, Conn.-based LIMRA International's distribution research area.

But that's also how the product stands out, advisers say. Kent Anthony, president of Sterling, Kan.-based First Group Insurance and past chairman of the Independent Insurance Agents & Brokers of America's National Technical Affairs Committee, considers the "dismemberment" part of the AD&D acronym more valuable and having broader appeal. He describes the accidental death part as a "false-sense-of-security rider" for supplementing life insurance when benefits are paid only if the insured dies from an accident and not from an illness.

"People need to understand what they're buying," he explains, adding that employers and advisers also need to correctly communicate AD&D to employees as a product enhancement and not a substitute for any type of coverage. While blue-collar workers in professions such as construction and mining that feature greater occupational hazards may be more prone to accidental death than others, Anthony says any employee could face dismemberment in the form of, say, a lost limb, blindness or hearing loss.


Communicating correctly

While AD&D is considered a "classic" product with broad penetration that people love to buy - not to mention one that's easy to implement on a voluntary basis and a money maker for insurance carriers - "it very seldom even delivers a benefit," cautions Tinker Kelly, president of Nashville, Tenn.-based Voluntary Employee Benefit Advisors. People may think they are going to perish in an accident, but he says "the reality is that is not how people die."

Just look at the numbers. For example, Americans have a one-in-five chance of dying from heart disease and one-in-seven chance of dying from cancer, whereas the odds are one-in-36 for an accidental injury, according to research from several leading sources that include the National Center for Health Statistics, Centers for Disease Control and Prevention, American Cancer Society and National Safety Council.

Still, there are other selling points to AD&D that could get overlooked. Unlike a number of other voluntary products, there's typically no medical evidence of insurability with this product. Jim Gemus, a senior vice president of Prudential Group Insurance based in Roseland, N.J., believes it is a particularly good fit for younger employees who generally lack life insurance and may think more about dying from an accident than a chronic illness.

The same could be said about the dismemberment component. Although people in general die much more often from illness or disease than from an accident, "offering additional coverage for accidents has marketing appeal," says Walt Podgurski, chairman and chief executive of the Workplace Benefits Association and publisher of Insurance Broadcasting, which is owned by EBN's parent company, SourceMedia.


Customization improves attractiveness

AD&D dates back more than a century in the U.S. before workers' compensation became prevalent and, despite its foibles, has withstood the test of time, Kelly notes. "Many people have had it for so long over the years that they just never replace it," he says.

Neyer senses that AD&D may fly farther beneath the radar than other employee benefits because more comprehensive types of coverage offer some of the same protection.

However, various plan features, along with an ability to customize coverage, may help raise the profile of AD&D products among employees. Stephen Pontecorvo, vice president, group life for MetLife in New York, says the insurer offers many optional benefits on policies that are portable in most instances and include business travel accidents.

They include anything from child or parental care and educational assistance to COBRA, rehabilitation services and physical therapy. "That may go a long way toward grabbing [employees'] interest a little bit more," he says.

As a product that complements life insurance and other types of insurance coverage, Pontecorvo believes AD&D can enhance the value of an employee benefits package for just pennies on the dollar and, ultimately, lead to improved loyalty - a finding borne out by MetLife's latest Annual Study of Employee Benefit Trends.

There also can be a synergistic fit between AD&D and disability insurance because of the need for income replacement in the event that an employee becomes disabled. "I think it's nice for them to know that there is going to be a lump-sum payment even if they can work," Anthony says.

Difficult times have served as a teachable moment for employees regarding AD&D coverage. "When recession comes, people start looking for less costly ways of solving their problems, and that becomes an issue if they think that they are getting life insurance by buying the accidental death [portion of an AD&D policy]," according to Anthony. "I worry about people's misconception, assuming that they have more than they actually have there."

"That being said," he continues, "it's better than nothing, and is one of the areas that they may be able to buy when they wouldn't be able to buy the other products. So I think in recessionary times it is a good product to look at for employers to add to their plan because it's not going to cost them an arm and a leg like maybe a disability policy would."

Bruce Shutan, a former EBN managing editor, is a freelance writer based in Los Angeles.

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