Supplemental Life Insurance vs. AD&D – Which is Better?

We covered a lot of ground in our main article on accidental death insurance versus life insurance. Reading that will give you the basics. 

Here we’ll compare supplemental life insurance vs. AD&D. These are slightly different in that we’re assuming you already have a life insurance policy. We will examine getting supplemental policies on top of both a work policy and an individual policy. 

Let’s get started.

Quick Summary

Oftentimes, the life insurance benefit through an employer isn’t enough. The solution is supplementing it through another life insurance or accidental death and dismemberment insurance policy. These are both insurance products designed to cover loss of life. 

There’s a big difference. Life insurance covers passing away from accidents and natural causes, such as a heart attack. Accidental death insurance only pays the benefit if the passing was the result of an accident.

You can use the instant quotes tool on this page to compare what a supplemental life insurance policy might cost, then head over to our AD&D guide to use that instant accidental death quotes tool.

What is a Supplemental Policy?

Supplemental insurance policies are policies purchased in addition to previous coverage. 

The most common example of a supplemental policy is purchasing an individual life insurance policy when you already have a basic life insurance coverage amount through your employer. 

People purchase supplemental policies for a variety of reasons. Most commonly, the insurance through an employer is inadequate for either coverage or peace of mind. 

Other reasons include looking for additional features, such as cash value accumulation. 

What is the Right Amount of Coverage?

You will see recommendations for death benefits between three and 20 times your current annual income. 

Most agents recommend 3-7x, but this is still more of a general guideline leftover from the days of door-to-door insurance sales. 

The best way to determine the right amount of life insurance coverage is to use a needs coverage calculator. That will account for your current assets, the number of children, current age, and other factors that go into making a financial decision. 

You can use our free life insurance needs calculator at this link.

Coverage also depends on how you plan on using your insurance. 

If it’s to cover dependent children or spouse for the rest of your working years, that will be a different amount than covering the mortgage on your home or focusing on cash value accumulation. 

Employer-Sponsored Life Insurance

According to LIMRA (Life Insurance and Market Research Association), a little over half of workers have life insurance coverage through their employers. The insurance could be either employer-paid or voluntary life insurance. 

As we always say, a little bit is better than nothing. 

That same LIMRA report also noted that less than ¼ of employees think that the employer’s life insurance is sufficient to cover their needs. 

That’s where the question of supplemental insurance comes into play. 

Typically, employers will have death benefits that match one (maybe two) years of your salary. If your real income leans more heavily toward bonuses or commissions, that can create an even bigger gap between the coverage that’s right for you and the coverage you have through work. 

The other limitation of getting insurance through your workplace is that you can’t take the policy with you if you leave your job. 

When to Supplement an Employer-Sponsored Life Insurance Policy

In an ideal scenario, you would have supplemental life coverage that bridges the gap between your needs and what you have through your work. 

The simple math on that statement means if your employer-based life insurance doesn’t cover your needs or your family members, get more. Another common situation in which getting supplemental life insurance coverage is wise is when you have group term life insurance. The additional protection through whole life insurance or a term life insurance policy can customize your insurance to your needs. It’s better than a one-size-fits-all group plan. 

That’s not always easy. We’ll cover whether it’s better to get a supplemental life insurance policy or accidental death & dismemberment coverage two sections down. 

The other ideal is getting your supplemental policy as young as possible because both types of insurance cost less the younger you are. 

When to Supplement an Individual Policy

Just like jobs change and HR benefits change, insurance needs change throughout your life too. For example, you may need additional benefits to support your increased income if you receive a promotion.

Another typical example we see is a growing family. Couples will get a small life insurance policy when they get married or buy a house. Then they’ll have a kid and realize they need more insurance. Most couples reassess their insurance needs after each child too. 

Most of the time, it’s better to get a supplemental policy rather than replace the original contract. Your rates are locked in, and you aren’t likely to get a better deal because you can’t get younger. 

The only exception is when your health dramatically improves and/or you stop smoking. 

There are also other types of life insurance for business loans, or sometimes supplemental policies are required in divorce settlements. 

But it all goes back to the difference between the coverage you have and the coverage you need – either economically or for peace of mind. 

Choosing a Supplemental Life Insurance vs. AD&D Policy

Life insurance covers all causes of death with a few exclusions in the contract for things like passing away while committing a felony. 

Accidental death only covers accidents. That’s the main difference.

Accidents are the leading cause of death for Americans between 25 and 44 years old. Then they get increasingly less statistically likely as people age. 

Choosing Life Insurance

Life insurance has many advantages for healthy people and even moderately healthy people. It covers all causes of death. It has more features you can add through riders. 

Even the type of life insurance plays a part. Many people focus on building cash value to help pay for their children’s education or use it as a retirement income stream. 

For more on the strategies of wealth building with insurance, click here.

The disadvantages of life insurance are that it can be more expensive and more challenging to qualify for than accidental death insurance. You need to provide evidence of insurability through your medical and financial records.

Life insurance covers a broad category of financial products, some of which can be complicated. You can choose from many types of life insurance with different pros and cons depending on your goals. Even selecting the type of policy and riders can involve a lot of internet research and discussing your situation with a knowledgeable agent. 

Choosing AD&D

Accidental death and dismemberment typically costs less than life insurance. It’s more affordable for people with lower incomes or budgets already straining at the seams. It’s also statistically more useful if you are under 44 years of age. 

AD&D is significantly less complicated than life insurance – an advantage. It offers less customization than life insurance – a disadvantage. 

The first step in choosing between life insurance and AD&D is examining your goals. What do you want your supplemental insurance to do for you? Is it solely for the death benefit? That could go either way, especially if you’re younger. If you’re 50+, looking into a final expense might make more sense, especially if you need your insurance to cover burial costs only. 

The next consideration is can you pass the medical exam? 

Even though there are many no-exam life insurance policies, AD&D never asks any health questions. If you aren’t sure whether or not your health will disqualify you, you might look into guaranteed issue policies that accept anyone.

These are all things you can explore with your insurance agent. 

Another consideration is dependent children. With children, it’s often better to choose peace of mind over anything else just to give yourself some breathing room in the parenting journey. 

Conclusion

AD&D insurance premiums are typically lower than your standard life insurance policy, but life insurance policies are more comprehensive and provide more options.

While it’s important to have the right benefit amount for your family’s financial situation, it’s also wise to consider financial protection for risks like severe injury, in which case disability insurance can help with financial security.

How Abrams Insurance Solutions Can Help

At Abrams Insurance Solutions, we’re focused on getting families the right coverage for their situation at the lowest possible price. We will shop the leading life insurance companies or accidental death companies to assist you in finding the best policy. Have questions? Give us a call at (858) 703-6178. 

You can use the instant quotes tool on this page to see what a supplemental life insurance policy might look like for you. Compare that to the instant accidental death quotes on our AD&D information page, and it will give you a start for making a smart comparison.