Accident and Sickness Insurance
Domain 5 covers policies whose trigger is a specific event - an accident or a named sickness - rather than all medical care. The exam tests definitions, benefit schedules, and how these products differ from major medical.
Accidental injury coverage
- Accidental death and dismemberment (AD&D) pays a principal sum for accidental death and a capital sum (a percentage of the principal sum) for specified losses: commonly 50% for one hand, one foot, or the sight of one eye, and 100% for two or more such losses.
- Death benefits usually require death within a stated period (often 90 or 365 days) of the accident.
- Loss must result from accidental bodily injury, independent of sickness. Accidental means (the cause was unintended) is stricter than accidental results (the result was unintended); most modern policies use the results standard.
- Exposures include common-carrier, travel, and blanket accident policies; franchise and group accident plans cover defined groups.
Sickness coverage
- Pays a stated benefit for a listed disease or for sickness generally, after a waiting period (often 7–30 days) that applies to illness but not to accidents.
- Benefit amounts may be scheduled (a fixed sum per diagnosis) or indemnity (a daily or per-service amount).
Worked example
Principal sum $100,000. An insured loses one hand in a car accident and, in the same accident, the sight of one eye.
- Each loss is scheduled at 50% of the principal sum.
- Combined loss = 100% × $100,000 = $100,000.
- A single loss would have paid $50,000. Plans cap total payment at the principal sum; if death later results from the same accident, the insurer pays the remaining difference toward the death benefit rather than paying twice.
Traps
- Treating AD&D as a substitute for health insurance - it pays a fixed sum, not medical bills.
- Paying the full principal sum for a single scheduled loss.
- Applying the sickness waiting period to accidental injuries.
- Overlooking exclusions such as self-inflicted injury, war, or commission of a felony, and the death time limit.