Final answer:
The principal sum of an AD&D policy rider is generally equal to the death benefit on the base life insurance policy. If a policyholder dies or experiences a qualifying accident, the AD&D pays an amount similar to the death benefit. correct answer is C) the death benefit on the base life insurance policy .
Step-by-step explanation:
An accidental death and dismemberment (AD&D) policy rider's principal sum is typically equivalent to the death benefit on the base life insurance policy. This means that if the policyholder dies or suffers a qualifying dismemberment, the policy pays out an amount that is equal to the death benefit the insured had under their base policy.
For instance, if the base life insurance policy has a death benefit of $100,000, the AD&D rider would also provide a principal sum of $100,000 in the case of accidental death or qualifying dismemberment. However, the policy might pay an additional amount (often double the principal sum) if the death or dismemberment occurs under specific circumstances as defined in the policy.
Some cash-value (whole) life insurance policies have an investment component that builds cash over time, which can be used by the policyholder for various purposes. The cash value is separate from the death benefit, which is the amount paid to beneficiaries upon the policyholder's death.