Double Indemnity

Updated: 09 June 2023

What Does Double Indemnity Mean?

Double indemnity is a clause in a life insurance policy that states the insurance company will pay twice the amount of money stated in the standard life insurance contract if the death of the insured results from an accident.

Most life insurance providers define an accidental death as a death that occurs specifically as a result of an accident — not a medical condition or from natural causes. This includes drowning, murder, car accidents or machinery. Suicide, murder by the beneficiary, acts of war, death from negligence (for example, not wearing a seatbelt) or extreme activities (skydiving, bungee jumping) are not considered accidental.

On average in North America, accidental deaths account for less than 5% of all deaths, and therefore this coverage is usually relativity inexpensive. Double indemnity clauses may not be available to those who have high-risk occupations, or the insurance provider may add a premium surcharge for this coverage depending on the occupation. This coverage can be added to standard life insurance contracts, group life insurance contracts, travel insurance contracts and others.

Insuranceopedia Explains Double Indemnity

Double indemnity stems from the word indemnity. In insurance, indemnity means that one party (the insurance company) will provide financial compensation or financial protection to another party (the insured) after a loss has occurred. When a client signs an insurance contract, the insurance company is promising to indemnify that person in exchange for the premium paid. For example, if one passes away from a heart attack (health condition), the life insurance company will indemnify the insured’s family by providing an agreed-upon payout in the life insurance contract as a means of compensation. If the death is accidental and the correct clause is present on the insurance contract, the insurance will provide double indemnity — or double the value — of the standard contract to the family.

The life insurance provider may provide double indemnity when the insured adds accidental death and dismemberment (AD&D) to a standard life insurance policy. This coverage will pay out the full sum of insurance when a death occurs or if more than one limb or eye is lost. This clause may also include levels of coverage depending on the loss or injury. For example, when AD&D coverage is on the contract, some life insurance providers will pay out half the total sum of life insurance when one member (limb or eye) is lost. This type of indemnity is called a living benefit.

In order to receive double indemnity for a life insurance policy, it must be proved that the death was accidental. Depending on the nature of the death, this may be physically obvious (murder, car accident, etc.), but the insurance company will still require records and autopsy reports by medical professionals to prove that the death was accidental.

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