14.4 Accidental Death & Dismemberment and Supplemental

AD&D Fundamentals

Accidental Death & Dismemberment (AD&D) pays benefits only when loss results from an accident, not from sickness or natural causes. Two key terms:

• Principal sum - the full face amount, paid for accidental death (and for the most severe dismemberments).
• Capital sum - a fraction of the principal sum, paid for a single dismemberment such as loss of one hand, one foot, or sight in one eye (commonly 50%).

Most AD&D policies require the loss to occur within a stated time after the accident (often 90 days or 180 days).

Typical Dismemberment Schedule (on a $100,000 principal sum)

Exam trap: AD&D never pays for death by illness. A heart attack is not an accident even though it is sudden.

Double Indemnity and Riders

A double indemnity (accidental death benefit) rider on a life insurance policy pays twice the face amount if the insured dies by accident within a stated period (typically 90 days) of the injury. A triple indemnity variant pays three times the face for accidents under defined circumstances (e.g., as a fare-paying passenger on a common carrier).

Worked example - double indemnity

An insured owns a $200,000 whole life policy with a double indemnity rider. The insured dies in a car accident, with death occurring 10 days after the crash (within the 90-day window).

• Base death benefit: $200,000
• Double indemnity (accidental death): additional $200,000
• Total paid: $400,000

If the same insured had instead died of cancer, only the $200,000 base benefit would be paid; the double indemnity rider adds nothing for non-accidental death.

Common exclusions: war, self-inflicted injury/suicide, aviation other than as a fare-paying passenger, and losses while committing a felony or while intoxicated.

Other Supplemental Products

Several supplemental products round out the limited benefit market. None is minimum essential coverage under the ACA, and each must disclose it is not comprehensive major medical.

• Gap insurance - pays a lump sum or scheduled amount to offset a high-deductible health plan's deductible and coinsurance.
• Short-term medical - temporary major-medical-style coverage (e.g., between jobs); medically underwritten, excludes pre-existing conditions, and is not guaranteed renewable.
• Accident-only (accident expense) - pays scheduled benefits for treatment of injuries from accidents, not illness.
• Travel accident - AD&D limited to losses while traveling.

Renewability classifications (testable)

Exam trap: "Noncancelable" and "guaranteed renewable" both guarantee renewal, but only noncancelable also locks the premium. Short-term medical is typically none of these (nonrenewable).

AD&D Capital Sum and Dismemberment Schedule

Accidental Death & Dismemberment (AD&D) pays only for losses resulting from accidental bodily injury, never sickness. Two payout tiers are tested: the principal sum is the full benefit paid for accidental death (or for loss of two members/both eyes — "double dismemberment"); the capital sum is a percentage of the principal sum paid for a single loss (e.g., 50% for loss of one hand, one foot, or sight in one eye).

Worked example: An AD&D policy has a $200,000 principal sum. Accidental death pays the full $200,000. Loss of one hand pays the capital sum of 50% = $100,000. Loss of two limbs (double dismemberment) pays the full principal sum = $200,000. AD&D pays nothing if the loss results from illness — the accident-only trigger is the central exam fact.

Double Indemnity and Common-Carrier Provisions

A double indemnity rider on a life policy doubles the death benefit when death is accidental (often within 90 days of the accident). A common-carrier (travel accident) benefit may pay an even higher multiple for death while a fare-paying passenger on a commercial carrier. These accidental-means provisions exclude deaths from disease, suicide, war, or hazardous activity — and the exam tests that an accidental-death rider adds nothing to a death from natural causes.

Accidental Means vs. Accidental Results

A classic AD&D exam distinction concerns how strictly the accident is defined. The older "accidental means" standard requires both the cause and the result to be unexpected — a stricter test that can deny benefits if the act was intentional even though the injury was not. The modern "accidental results (accidental bodily injury)" standard, more favorable to insureds, asks only that the result be unintended. Most current policies use the accidental-results standard.

Worked dismemberment-schedule example: An AD&D policy has a $300,000 principal sum. The insured loses sight in one eye in an accident — the capital sum of 50% = $150,000 is paid. Loss of sight in both eyes would pay the full $300,000 principal sum. A later death from cancer pays $0, because AD&D excludes loss from sickness.

Common Exclusions and Supplemental Travel Coverage

AD&D and accidental-death riders share standard exclusions: suicide, illness or disease, war, aviation (other than as a fare-paying passenger), and hazardous activities. Travel-accident and common-carrier benefits narrow coverage to accidents while traveling, often as a fare-paying passenger on a commercial carrier, sometimes at an enhanced multiple. The exam stresses that these supplemental products never respond to natural-cause death and are excepted benefits, not health insurance.