If the policy contains the optional misstatement of age provision, amounts payable under the policy will reflect the insurer’s correct age. An insured loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will she most likely receive from this policy?
The correct answer and explanation is :
The insured will most likely receive the capital sum benefit from the Accidental Death and Dismemberment (AD&D) policy.
Explanation:
An Accidental Death and Dismemberment (AD&D) policy provides benefits in case of accidental death or severe injuries, such as dismemberment or loss of bodily functions (e.g., eyesight, hearing, or limbs). These policies typically pay a principal sum if the insured dies due to an accident and a capital sum for non-fatal but serious injuries.
In this scenario, the insured loses her left arm in an accident, which qualifies as dismemberment. AD&D policies define the benefit amount for dismemberment based on a schedule of losses included in the policy. Typically:
- Loss of both hands, both feet, sight in both eyes, or a combination (such as one hand and one foot) results in payment of the full principal sum (100% of the policy benefit).
- Loss of one hand, one foot, or sight in one eye usually results in payment of the capital sum, which is a percentage (often 50%) of the principal sum.
Since the insured lost one arm, the policy will likely pay 50% of the principal sum, as per the standard schedule of losses.
The optional misstatement of age provision does not directly affect the dismemberment claim. This provision applies when an insured’s age is misstated in the policy application. If age correction affects premium calculations, the insurer adjusts the benefits accordingly. However, in this case, the claim is based on the insured event (loss of an arm) rather than age-related factors, so the insured will receive the appropriate capital sum per the policy terms.
Thus, the insured will most likely receive a capital sum payout (typically 50% of the principal sum).