Final answer:
The insured with the Accidental Death & Dismemberment policy would receive $50,000, which is the full principal value, upon the loss of sight in both eyes due to an accident.
Step-by-step explanation:
The question pertains to an Accidental Death & Dismemberment (AD&D) policy with a principal value of $50,000. In the event of an accident in which the insured loses sight in both eyes, the policy will typically pay out the full principal sum. Therefore, the correct answer is b) $50,000.
AD&D policies provide a lump-sum payment in cases of accidental death or specific types of injury, such as losing sight, hearing, or a limb. The payment for losing sight in both eyes is usually considered a full benefit payment, equal to the principal value of the policy.
Taking into consideration how insurance companies function, they collect premiums to cover the risks incurred by their policyholders. For instance, if each of the 100 drivers pays a $1,860 premium each year, the company will collect the $186,000 necessary to cover the anticipated costs of accidents. This principle underlies all types of insurance, including AD&D policies. As such, the insured with the AD&D policy would receive a benefit of $50,000.