14.4 Accidental Death & Dismemberment and Supplemental

Accidental death and dismemberment (AD&D) insurance pays a benefit when an accident causes death or the loss of a body part or function. The defining limitation is that it is accident-only — it pays nothing when the cause is sickness or natural causes. AD&D is sold as a standalone policy, a low-cost group benefit through employers, or a rider attached to a life or health policy. Because it excludes the leading causes of death (illness), AD&D should never be presented as a replacement for life insurance.

Principal Sum and Capital Sum

Two key terms define the payout, and the exam tests the distinction repeatedly:

• Principal sum — the full benefit paid for accidental death or for severe combined losses (e.g., loss of two limbs, two eyes, or speech and hearing).
• Capital sum — a percentage of the principal sum paid for a single dismemberment, set by a published schedule. A single loss never pays the full principal sum.

Losses generally must be the direct and sole result of the accident, independent of any pre-existing condition or illness.

The schedule scales the payout to the severity of the loss, so producers should walk clients through it during the application. A worksite buyer often assumes any injury pays the full amount; in reality, losing a single finger or partial sight pays a small fraction. Setting that expectation prevents complaints and bad-faith allegations at claim time.

Typical Dismemberment Schedule

The loss must usually occur within a stated time of the accident (commonly 90 days) and be a direct result of the accident, independent of any illness.

Capital vs. Principal Sum, Common Exclusions, and a Dismemberment Worked Example

AD&D benefits are defined by two key figures the exam tests directly. The principal sum is the full benefit paid for accidental death or for a severe loss such as two limbs or sight in both eyes (often called the capital sum when paid for the most severe dismemberments). A lesser loss — one limb or sight in one eye — pays a scheduled fraction, commonly one-half the principal sum. A thumb-and-index-finger loss might pay a quarter.

What AD&D excludes

Because it is accident-only, AD&D typically excludes loss from illness, suicide, war, self-inflicted injury, intoxication, and most aviation (except as a fare-paying passenger), and usually requires the loss to occur within a stated time (often 90 days) of the accident.

Worked dismemberment example

A policy has a $100,000 principal sum. The insured loses one hand in a covered accident; the schedule pays 50% of the principal sum for loss of one limb, so the benefit is $50,000. Had the insured lost both hands (or died), the full $100,000 principal/capital sum would be paid. If the same insured had instead died of a heart attack, AD&D pays $0, because the cause was sickness, not accident.

Travel and supplemental forms

Common AD&D variants include travel accident policies, common-carrier coverage (paying only for accidents while a fare-paying passenger), and employer group AD&D added to group life. Each shares the accident-only trigger and the principal/capital-sum schedule, and none should be presented as a substitute for life insurance, which covers death from any cause.

Double Indemnity Rider

A double indemnity rider on a life insurance policy pays twice the face amount if the insured dies as the result of an accident, usually within 90 days of the accident. It is an accidental death benefit (ADB) rider, and a triple indemnity variant exists for deaths in specified circumstances such as on a common carrier. If the insured dies from illness, only the base face amount is paid.

Example: A $250,000 whole life policy with a double indemnity rider pays $500,000 for accidental death, but only $250,000 for death by natural causes. The rider adds a small premium because it covers a narrow, low-probability cause of loss, and it typically terminates at a stated age (often 65 or 70) when accidental death becomes statistically less likely than death by illness.

The rider's accidental-death definition mirrors a standalone AD&D policy: the death must result directly from an accidental bodily injury, independent of illness, and usually within 90 days of the accident. The same exclusions — war, suicide, self-inflicted injury, and non-passenger aviation — apply. Because the doubled benefit attaches only to accidental death, a client who needs more total protection is generally better served by a higher base face amount than by relying on the rider, a key suitability point for the producer to raise.

Supplemental Accident and Travel Products

Accident-only medical plans reimburse or pay scheduled amounts for the treatment of injuries (not illness) — emergency-room visits, fractures, dislocations, lacerations, and follow-up therapy. Travel-accident policies cover accidental death or injury during a covered trip, and common-carrier coverage pays a higher benefit for accidents while riding a commercial plane, train, or bus. Both are limited benefit / excepted benefits and are not minimum essential coverage.

These products are popular as low-cost worksite voluntary benefits because the premium is small, underwriting is light, and the cash benefit helps an injured worker bridge a deductible or lost wages. As with all limited plans, the producer must disclose that they pay only for accidents and do not cover sickness.

Common AD&D Exclusions

• Death or loss caused by illness or disease.
• Suicide or intentionally self-inflicted injury.
• War or acts of war.
• Aviation, except as a fare-paying passenger on a commercial flight.
• Injury while committing a felony or while intoxicated.

Traps

• AD&D is not life insurance — a death from cancer or heart disease pays nothing.
• The capital sum is a percentage of the principal sum, not a separate fixed amount.
• Double indemnity is triggered by accidental death only and lapses or terminates at a stated age (often 65–70).