What Is a Double Indemnity Rider?
Learn about the double indemnity rider, an optional insurance feature that can multiply your policy's financial benefit.
A double indemnity rider is an additional provision that can be added to a life insurance or accidental death and dismemberment (AD&D) policy. This optional add-on is designed to increase the payout to beneficiaries under very specific circumstances. It primarily applies when the insured’s death is the direct result of an accident, rather than natural causes or illness.
Understanding Double Indemnity
Double indemnity functions as a clause within an insurance policy, stipulating that the insurer will pay beneficiaries twice the face value of the policy. This means if a policy has a $100,000 face value and includes a double indemnity rider, the beneficiaries could receive $200,000 upon the insured’s accidental death.
The enhanced payout is contingent solely on death occurring due to a specific type of accidental event. This distinguishes it from a standard life insurance payout, which covers death from most causes, including illness or natural causes. The double indemnity rider offers an additional, larger benefit only when the death meets the strict definition of an accident as outlined in the policy.
Qualifying Events for Payout
For a double indemnity rider to trigger a payout, the insured’s death must be accidental, meaning it cannot be due to natural causes, illness, or self-inflicted injury. Insurance companies have specific guidelines defining what constitutes an accidental death for these purposes.
Common examples of qualifying accidental events include fatalities resulting from car accidents, falls, drowning, or certain types of workplace incidents. Other covered accidents might involve homicide by someone other than the beneficiary, exposure to toxic materials, or accidents due to defective machinery. The policy will define “accident” specifically, and the death must directly result from such an accident within a specified timeframe, often 90 to 365 days from the date of the accident.
Common Exclusions
Double indemnity riders include specific situations or causes of death that are not covered, even if they result in death. These exclusions are designed to limit the insurer’s risk and are clearly outlined in the policy terms.
Typical exclusions include death due to illness or natural causes, suicide, or death while under the influence of drugs or alcohol. Deaths occurring during the commission of a felony or from war or military service are also commonly excluded. Deaths resulting from dangerous hobbies or activities not disclosed or covered, such as extreme sports, or from the insured’s own negligence, are not eligible for a double indemnity payout.
Impact on Insurance Premiums
Adding a double indemnity rider to an insurance policy results in an increase in the premium. However, this increase is relatively small when compared to the cost of the base policy premium. This is partly because accidental deaths account for a small percentage of all deaths annually, approximately 5% in the United States.
The specific cost of the rider can be influenced by various factors, including the insured’s age, overall health, and occupation. For instance, individuals in high-risk professions might find the rider unavailable or subject to a premium surcharge. The double indemnity rider represents an additional cost for an enhanced benefit, providing extra financial protection in the rare event of an accidental death.