14.4 Accidental Death & Dismemberment and Supplemental

Accidental death and dismemberment (AD&D) and the broader family of supplemental health products round out the limited-benefit landscape. The exam tests the principal sum / capital sum mechanics of AD&D, the strict accident-only causation standard, and how Medicare Supplement (Medigap) and other gap products fit alongside primary coverage.

AD&D Fundamentals

AD&D pays only when loss results from an accident — never from sickness or natural causes. It defines two key amounts:

Most AD&D policies require death or loss to occur within a set window — commonly 90 to 180 days of the accident — for the claim to be payable.

Dismemberment Schedule (Worked Example)

Losses are paid per a schedule expressed as a percentage of the principal sum. A typical schedule:

With a $100,000 principal sum: an insured who loses one hand in a covered accident receives the capital sum of 50% = $50,000. An insured who loses sight in both eyes receives the full principal sum of $100,000.

Double indemnity is a related life-insurance rider that pays twice the face amount if death is accidental — e.g., a $200,000 policy pays $400,000 on accidental death but only $200,000 on death by illness.

AD&D Exclusions & Travel Accident Coverage

Because AD&D is accident-only, expect exclusions for:

• Death or injury from illness, disease, or natural causes.
• Suicide or intentionally self-inflicted injury.
• War, and (often) commission of a felony.
• Aviation, except as a fare-paying passenger.

Travel accident policies are a specialized AD&D form covering accidents while traveling. Common carrier coverage pays only when the accident occurs aboard a licensed public conveyance (airline, bus, train).

Trap: A heart attack while on vacation is sickness, not an accident. AD&D and travel accident policies pay nothing for it.

Medicare Supplement & Other Gap Products

Medicare Supplement (Medigap) policies fill the deductibles and coinsurance gaps in Original Medicare. Key tested rules:

• Sold as standardized plans (lettered A through N); within a state, every Plan G is identical regardless of insurer — only price and service differ.
• Open enrollment is a 6-month window beginning when the applicant is 65 and enrolled in Part B, during which coverage is guaranteed issue with no medical underwriting.
• Medigap does not work with Medicare Advantage; it supplements Original Medicare only.

Other supplemental gap products include short-term medical, gap/bridge plans, and disability income (which replaces lost earnings, not medical costs).

Trap: It is illegal to sell a Medigap policy to someone enrolled in Medicare Advantage unless they are disenrolling. Stacking duplicate Medigap policies is also prohibited.

Disability Income vs Medical Supplements

A recurring exam contrast pits disability income (DI) against medical-gap products. DI replaces a percentage of lost earnings when the insured cannot work; it pays nothing toward medical bills. AD&D, hospital indemnity, and Medigap address medical or accidental-loss costs, not lost wages.

Group AD&D and Suitability

AD&D is frequently offered as a low-cost group rider on employer life or health plans, and as a voluntary payroll-deduction benefit. Because it pays only for accidents, it is a supplement to — never a substitute for — life or major medical coverage. Recommending AD&D as a client's primary death-benefit protection is unsuitable: the bulk of deaths arise from illness, which AD&D excludes. The producer's job is to position each gap product for the specific risk it actually covers.

AD&D Principal Sum and Capital Sum

AD&D pays only for losses caused by accident, never sickness. Two terms govern the payout:

• Principal sum — the full benefit, paid for accidental death or for the loss of two or more members (two limbs, sight in both eyes, or one limb plus one eye).
• Capital sum — a percentage of the principal sum (often 50%) paid for the loss of one member (one hand, one foot, or sight in one eye).

Worked example: a policy with a $200,000 principal sum pays the full $200,000 for accidental death or loss of two limbs, but the capital sum of $100,000 (50%) for loss of a single hand. AD&D is frequently sold as a rider on life or group policies and as standalone travel-accident coverage. The principal-vs-capital distinction is the core AD&D math the exam tests.

Exclusions and the Accidental-Means Standard

Because AD&D covers only accidents, its exclusions are broad: death or loss from sickness, suicide, war, aviation (except as a fare-paying passenger), illegal acts, and intoxication are typically excluded. Older policies used an "accidental means" standard (the cause must be unexpected); modern policies more often use "accidental results" (the outcome must be unexpected) — a more generous test for the insured.

Travel-accident coverage is a common AD&D form, paying a high principal sum for death during a covered trip. The exam contrasts AD&D (accident-only, lump sum) with disability income (replaces ongoing income) and with medical supplements (pay or reimburse care). Recognizing that AD&D pays nothing for illness-related death — even sudden cardiac death from disease — is the single most common AD&D trap.