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Textbook
1. General Insurance Concepts
2. Producer Roles and Receipt Types
3. Principles of Life Insurance
4. Underwriting
5. Term Life Insurance
6. Whole Life Insurance
7. Variable Insurance Products
8. Group Life Insurance
9. Life Insurance Provisions
10. Annuities
11. Taxation of Life Insurance Products
12. Qualified Retirement Plans
13. Health Insurance Basics
14. Required Policy Provisions
15. Optional Policy Provisions
16. Medical Expense Insurance
17. Group Health Insurance
18. The Affordable Care Act (ACA)
19. Disability Income Insurance
20. Accidental Death and Dismemberment Insurance
21. Long Term Care Insurance
22. Dental Insurance
23. Section 125 Plans and Limited Policies
24. Federal Government Programs
25. Medigap and Medicaid
26. Health Insurance Taxation
Wrapping Up
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20. Accidental Death and Dismemberment Insurance
Achievable Life & Health
Our Insurance Life & Health course is in "early access"; the content on this page is a work-in-progress.

Accidental Death and Dismemberment Insurance

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Accidental death and dismemberment insurance (AD&D) is the only type of health insurance that includes a death benefit. It is a relatively inexpensive way to enhance coverage but is not a substitute for life insurance. AD&D pays a lump-sum benefit only in the event of accidental death or dismemberment and does not offer any cash value like a whole life policy.

The principal sum is the full benefit amount paid for accidental death or for severe dismemberment, such as the loss of both limbs or total blindness. Loss of two limbs, both eyes, or life typically results in 100% of the principal sum. The capital sum is the amount paid for dismemberment, usually a percentage of the principal sum. For example, losing one arm or one eye may result in 50%, while partial losses like a thumb and index finger may result in 25% or less, depending on the policy.

The principal sum paid on an AD&D policy is paid in the same manner as a life insurance death benefit. A beneficiary must be designated and the death benefit can be paid under any of the settlement options common to life insurance benefits.

AD&D policies often include a “physical examination and autopsy” provision, which allows the insurer to request an autopsy in the event of a death claim, as long as it is not prohibited by law. The cost is typically covered by the insurer.

The primary exclusions of these policies are:

  1. Accidental death or dismemberment sustained while committing a crime.
  2. Being impaired by alcohol or narcotics at the time of the accidental death or dismemberment.
  3. Anything covered by workers’ compensation.

AD&D policies also typically exclude losses resulting from war, suicide, illness, or injuries sustained while engaging in hazardous activities or under the influence of substances, even if the person is not visibly impaired.

A common variation of AD&D that is sold in airport terminals and by travel agents is called travel accident insurance. This policy will cover you while flying on a regularly scheduled commercial flight, but not on private planes. Coverage is written to cover one specific trip only.

Lesson Summary

Accidental Death & Dismemberment (AD&D) Insurance

  • Pays a lump-sum benefit for death or dismemberment caused solely by accidental means.
  • The principal sum is paid for death or severe loss (e.g., both limbs or both eyes).
  • The capital sum is paid for dismemberment, typically as a percentage of the principal sum. Benefits follow a schedule of loss (e.g., 100% for death, 50% for one limb, 25% for thumb/index finger).
  • It is not a substitute for life insurance and has no cash value.

Chapter Vocabulary

Definitions
Accidental Death & Dismemberment (AD&D)
(1) A type of health insurance policy.
(2) A provision or rider attached to a life or disability income policy that pays either a specified amount if the insured dies, loses his/her sight, or loses a limb as the result of an accident.
Dismemberment
Loss of arm or leg by severance above the wrist or ankle. It also includes the total and permanent loss of sight. Some policies also pay partial benefits for loss of digits, such as fingers or toes, depending on the schedule of loss.

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