14.4 Accidental Death & Dismemberment and Supplemental

Accidental Death & Dismemberment (AD&D)

AD&D pays benefits only for losses caused by accident — never illness, disease, or natural death. It is sold as a life-insurance rider, a group benefit, or standalone voluntary coverage. Two defined amounts control every AD&D claim:

• Principal sum — the full face amount, paid for accidental death or the most severe dismemberments (loss of two limbs, sight in both eyes).
• Capital sum — a stated percentage of the principal sum paid for a single, lesser loss (one hand, one foot, sight in one eye).

The schedule of benefits sets each percentage:

"Loss" means complete severance (amputation) or total, irrecoverable loss of use. Worked example: with a $200,000 principal sum, accidental loss of one hand pays the 50% capital sum = $100,000; loss of both feet pays the full $200,000.

Common exclusions: death/injury from illness or disease, suicide or self-inflicted injury, war, and (often) intoxication or commission of a felony. Group AD&D is usually written at 1–3× salary; voluntary AD&D is cheap (a few dollars per month for six-figure coverage) precisely because it pays in such a narrow set of circumstances.

The Time Limit on Loss

Most AD&D contracts require the death or dismemberment to occur within a stated period after the accident — historically 90 days, now often 365 days. If the insured is injured in a covered accident but dies of those injuries after the time limit, the accidental death benefit may be denied even though the chain of causation is clear. Read the question for that timing trap.

AD&D Benefit Schedule (Principal Sum vs. Capital Sum)

AD&D pays the principal sum for accidental death and a capital sum (a percentage of the principal) for specified dismemberments. A common schedule pays 100% for loss of two limbs or sight in both eyes and 50% for loss of one limb or sight in one eye. Worked example: a $200,000 AD&D policy pays $200,000 for accidental death or loss of two limbs, but $100,000 for loss of a single hand. The exam tests that death and double dismemberment pay the full principal sum, while single losses pay the capital sum percentage.

Supplemental Coverage and the Producer's Role

The "supplemental" family wraps together the products in this unit — LTC, dental, vision, limited benefit, specified disease, critical illness, hospital indemnity, and AD&D — plus accident expense and Medicare supplement (Medigap) policies. They share three exam-relevant traits:

1. Narrow trigger — each pays only for a defined event (an accident, a confinement, a diagnosis).
2. Fixed or scheduled cash — most pay valued/indemnity amounts, not a percentage of charges.
3. No coordination — they pay in addition to major medical, so the insured can carry several at once.

Tax Treatment Cheat-Sheet

Trap: employer-paid premiums for these benefits are generally not taxable income to the employee for accident-and-health coverage — different from employer-paid group life over $50,000, where the cost of the excess coverage is imputed income.

Suitability and Disclosure

Because supplemental products are inexpensive and emotionally compelling, the exam stresses suitability: a producer must recommend supplements only where a genuine gap exists, must disclose that they do not provide comprehensive coverage, and must deliver the required outline of coverage. Stacking unsuitable supplements while the client lacks major medical is the textbook example of an unsuitable, misrepresented sale.

AD&D Versus Life Insurance — Don't Blur Them

A frequent exam comparison: ordinary life insurance pays for death from any cause (subject to the contestability and suicide clauses), while AD&D pays only for accidental death. A "double indemnity" rider on a life policy is essentially built-in AD&D: it pays an extra amount equal to the face amount if death is accidental. So a $250,000 life policy with a double-indemnity rider pays $500,000 for accidental death but only the base $250,000 for death by illness.

Putting the Unit Together

Worked recap: a 68-year-old with major medical, a tax-qualified LTC policy ($200/day, 90-day elimination, 3-year benefit period), a dental plan, and an AD&D rider has layered, non-overlapping protection. The major medical handles acute illness; LTC funds future custodial care once 2 ADLs fail for 90+ days; dental/vision fill routine ancillary needs; and AD&D adds accidental-death protection — none coordinates against the others, so each pays its defined role independently.

Common-Carrier and Travel AD&D

Many AD&D contracts and credit-card benefits include enhanced common-carrier coverage: if the accidental death occurs while riding as a fare-paying passenger on a scheduled bus, train, or airline, the policy may pay a multiple of the principal sum (for example, 2× or 3×). This is why travel accident coverage is marketed as high-face, low-cost protection.

Worked example: a $100,000 AD&D policy with a 3× common-carrier provision pays $300,000 for accidental death aboard a commercial flight, but only the base $100,000 for an accidental death at home. Always match the loss to the schedule and the location/transport conditions stated in the contract before computing the benefit.