Capital sum vs. principal sum
Also known as: principal sum, capital sum
In an accidental death and dismemberment policy, the principal sum is the full benefit paid for accidental death, while the capital sum is the smaller benefit — usually a stated percentage of the principal sum — paid for a covered dismemberment such as loss of one hand or sight in one eye.
Accidental death and dismemberment (AD&D) coverage pays a lump sum when an accident causes death or a specified severe loss. The policy states one headline amount, the principal sum, and then scales benefits down from it depending on the severity of the loss.
The principal sum is paid for accidental death. It is also typically paid for the most severe dismemberments, often called double dismemberment — for example, loss of both hands, both feet, or the sight of both eyes. The capital sum is the benefit for a single severe loss, such as one hand, one foot, or sight in one eye, and it is commonly set at 50 percent of the principal sum, with lesser losses like a single thumb and index finger paid at a smaller stated percentage.
An example makes the relationship clear. On a policy with a $200,000 principal sum, an accidental death claim pays $200,000. Loss of both feet in a covered accident also pays the principal sum. Loss of one foot pays the capital sum, $100,000 under a policy that sets the capital sum at half the principal sum. Because AD&D pays only for losses that are accidental, a loss caused by illness or a non-covered event pays nothing, and most policies require the loss to occur within a set time period after the accident.
This distinction shows up regularly on the health insurance licensing exam. Test questions usually give a principal sum and describe a specific loss, then ask what the insurer pays — so the reliable approach is to identify whether the loss is death or double dismemberment (principal sum) or a single loss (capital sum), and apply the policy's stated percentage.
Key takeaways
- The principal sum is the full AD&D benefit, paid for accidental death and generally for double dismemberment.
- The capital sum is the benefit for a single severe loss, such as one hand, one foot, or sight in one eye.
- The capital sum is commonly 50 percent of the principal sum, with smaller percentages for lesser losses.
- AD&D benefits apply only to accidental losses, not to losses caused by illness.
- Exam questions typically give a principal sum and a described loss and ask for the amount payable.