14.4 Accidental Death & Dismemberment and Supplemental

Accidental Death & Dismemberment (AD&D)

AD&D insurance pays a benefit when the insured dies or suffers a specified physical loss as the direct result of an accident. It does not pay for death or loss caused by illness, disease, or natural causes — that distinction is the single most tested point.

Principal Sum and Capital Sum

The principal sum is the full face amount, paid for accidental death or for severe combined losses. The capital sum is a percentage of the principal sum paid for less-than-total dismemberment.

"Loss" usually means severance at or above the wrist/ankle, or total and irrecoverable loss of sight.

Worked example: An insured holds an AD&D policy with a $200,000 principal sum. In a covered accident the insured loses the sight in one eye. The capital sum at 50% pays $100,000. If the insured had lost sight in both eyes, the full $200,000 principal sum would be paid.

AD&D Provisions and Exclusions

AD&D benefits typically require the loss to occur within a stated time of the accident (commonly 90 days). Common exclusions include:

• Death or loss from illness, disease, or natural causes
• Suicide or intentionally self-inflicted injury
• War or acts of war
• Loss while committing a felony or while intoxicated/under non-prescribed drugs

Double indemnity is a related life-insurance rider that doubles the death benefit when death is accidental — conceptually similar to AD&D's accidental-death portion but attached to a life policy.

Exam trap: A question describing an insured who dies of a heart attack while holding an AD&D policy is testing the accidental-loss requirement — the claim is denied because death resulted from a natural cause, not an accident.

Accident-Only and Supplemental Plans

Accident-only plans pay scheduled benefits for injuries from accidents — emergency-room visits, fractures, dislocations, follow-up care — but pay nothing for sickness. Like other limited plans, they are fixed-indemnity supplements, not comprehensive coverage, and must be disclosed as such. These plans pair naturally with critical illness and hospital indemnity coverage to round out an insured's supplemental protection without coordinating against major medical.

Medicare Supplement (Medigap) Insurance

Medicare Supplement, or Medigap, insurance is sold by private insurers to fill the gaps (deductibles, copays, coinsurance) left by Original Medicare (Parts A and B). It is the most tested supplemental product alongside AD&D.

Standardization

Medigap plans are standardized into lettered plans (A, B, C, D, F, G, K, L, M, N). Within a state, a given letter offers identical core benefits across all insurers — only the price and service differ. Plans C and F, which covered the Part B deductible, are no longer available to those newly eligible for Medicare on or after January 1, 2020.

Open Enrollment and Guaranteed Issue

The Medigap open enrollment period is a 6-month window beginning the first month the individual is age 65 or older and enrolled in Medicare Part B. During this window coverage is guaranteed issue — the insurer cannot deny coverage, charge more, or impose extended waiting periods based on health. After this window, the applicant may face medical underwriting.

Trap: Medigap supplements Original Medicare only; it does not work with a Medicare Advantage (Part C) plan, and it is illegal to sell a Medigap policy to someone enrolled in Medicare Advantage unless they are disenrolling.

Medicare Parts in Context

To place Medigap correctly, candidates must know the four parts of Medicare:

Medigap exists precisely because Part B leaves the insured responsible for 20% coinsurance with no out-of-pocket cap under Original Medicare alone. A Medigap plan absorbing that 20% protects the insured from unlimited exposure on a costly outpatient course of treatment.

Replacement and Suitability

When a producer replaces an existing Medigap policy, federal and state rules require a replacement notice, comparison of benefits, and attention to suitability — selling an additional Medigap policy to someone who already has one, or a policy that duplicates existing coverage, is prohibited. Producers must also respect the free-look period (commonly 30 days for Medicare-related policies), during which the insured may return the policy for a full refund. These conduct rules turn up alongside the benefit mechanics on the national portion, so treat Medigap as both a product and an ethics topic.