What does the term "principal sum" refer to in an Accidental Death and Dismemberment Rider?

The term "principal sum" in the context of an Accidental Death and Dismemberment (AD&D) Rider specifically refers to the full face amount that is paid out upon the death of the insured due to an accident. This term is crucial as it defines the maximum amount that the insurance policy would pay in the event of a qualifying accidental death or dismemberment.

When an insured individual suffers a dismemberment (such as the loss of a limb), the principal sum often applies directly to the specific benefits outlined in the policy. In many cases, the payout for double dismemberment, such as losing both arms or both legs, would be equivalent to this principal sum. Therefore, understanding that the principal sum indicates a specific, substantial payment linked to severe accidental conditions helps to clarify its significance in the overall insurance policy structure.

This concept is distinct from the other options, which discuss costs for medical expenses, initial premiums, or total payouts for accidental death without accurately capturing the specific meaning associated with "principal sum" in AD&D circumstances.