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Merritt Personal Lines Manual: Accidental Death and Dismemberment (AD&D)

AD&D is a form of coverage that pays either a specified amount or a multiple of the weekly disability benefit if a policyholder dies, loses his or her sight or loses two limbs as a result of an accident.

An AD&D plan has two parts: the accidental death benefit and the accidental dismemberment benefit.

The accidental death benefit -- commonly referred to as the principal sum -- is actually the "face amount" of the policy. So, if you buy a $100,000 AD&D benefit, the principal sum paid to your beneficiary if death is caused by an accident is $100,000.

Your insurance company will define -- in a liberal or restrictive way -- the words accident and accidental death in the policy.

We will examine the definition of accident here, because if you're in the market for health insurance, you probably won't need to determine how your insurance will define accidental death for the purposes of receiving health benefits.

If you get in an accident and suffer the loss of a limb -- but don't die -- the policy's accidental dismemberment benefit will be paid. This benefit is referred to as the capital sum. The capital sum is the same as the face amount. So, if you have a $100,000 AD&D benefit, the capital sum is the same $100,000.

Eligibility for the dismemberment benefit usually requires the actual severance of a body limb such as an arm or a leg. This is different than loss of use of a limb. And the distinction gets a little gory.

If you are severely injured in an accident and suffers the loss of use of your legs, the capital sum will not be paid for loss of use. Your legs must be severed as a result of the accident.

Most policies will require the severance of two limbs (such as both arms) in order for the full capital sum to be paid. Loss of only one limb frequently results in just 50 percent of the capital sum being paid. AD&D policies usually require that the loss must occur within a specified period of time following the accident, such as 90 days.

For example, if you are injured in an accident and linger between life and death and then finally die four months later, the principal sum would not be paid, since death occurred after the 90-day period.

AD&D benefits are normally purchased in the form of a rider rather than as a separate policy. The premium is characteristically low; often just 10 or 20 cents per thousand dollars of insurance. It would be too expensive for the insurance company to issue a complete policy in return for just a $25 or $50 annual premium. Because of this, the benefits are usually made available as a rider to a life or health policy.

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