What’s a Multiple Indemnity Rider? Definition, Pros & Cons

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An old classic film made in 1944 is still popular today. The plot centers around a conservative life insurance salesman smitten with a woman who entices him into murdering her husband so she can collect on an insurance policy her husband has that names her as the beneficiary.

The film was named Double Indemnity after a clause written into a life insurance policy that pays twice the face amount to the beneficiary upon the insured's death. This clause has been used frequently in many murder mysteries.

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This article will dive deeper into multiple indemnity riders, like double indemnity, what they are, how much they cost, their advantages, and more.

Since we're going to be talking about a rider for a life insurance policy, let's first clarify what exactly a rider is.

What Is a Rider for a Life Insurance Policy?

A rider is an insurance policy provision that amends or adds benefits to the terms of a basic life insurance policy. Riders give insured individuals more coverage options, allowing them to customize their life insurance policy. Riders cost extra, but most don’t substantially raise the life insurance premium since little underwriting is involved. Riders cannot only be added to life insurance policies, but they can also be added to home, auto, and rental unit policies.

Definition Of a Multiple Indemnity Rider

A multiple indemnity rider is a clause in a life insurance policy that stipulates a multiple of the face amount will be paid to the beneficiary upon the insured's death, under certain circumstances. With life insurance policies, "certain circumstances" usually mean death by accidental causes. 

Usually excluded from "accidental means" would be suicide, death by natural causes, death caused by gross negligence of the insured (i.e., dying in a car accident while driving while impaired), death suffered in a hazardous activity such as hang-gliding or skydiving, or murder perpetrated by a beneficiary of the policy.

The word "multiple" is used in conjunction with the indemnity clause because typically, two times the face amount of the policy is paid out in the event of an accident. Some policies even have triple indemnity features that pay out three times the face amount if the insured's death is caused by a covered accident. These riders are often known as accidental death benefit riders.

The most common multiple indemnity rider is the double indemnity rider. You'll find very few policies offering a triple indemnity rider.

How Do Multiple Indemnity Riders for Life Insurance Policies Work?

Multiple indemnity riders for life insurance policies are very straightforward. A double indemnity rider pays two times the face amount when an insured individual dies by accidental causes. 

For example, Larry applied for and was issued a $100,000 term life insurance policy with a double indemnity rider (aka accidental death benefit rider). Six months after the policy was issued, Larry was shot and killed while out hunting. Larry’s death was investigated and was determined to be the cause of an accident by the authorities. Larry’s beneficiary was paid two times the face amount of the $100,000 life insurance policy, which was $200,000, because of the double indemnity rider.

Interestingly, if the fellow hunter that shot and killed Larry had been the beneficiary of Larry’s life insurance policy, there would have been a very lengthy investigation. The reason being is that someone who murders another person to receive a death benefit from a life insurance policy cannot legally collect it.

In this example, if Larry’s policy did happen to be a triple indemnity policy, Larry’s beneficiary would have received three times the face amount of the life insurance policy, or $300,000.

With an accidental death benefit rider, the death must occur within a set period after the accident, usually 90 days, for the life insurance company to pay out the extra death benefit. 

The multiple indemnity rider also comes with exclusions and won’t pay out under certain circumstances, including death from:

  • Disease
  • Mental illness
  • Alcohol in combination with drugs or medications
  • Rioting or insurrection
  • Suicide

An accidental death benefit rider will increase a policy’s premium amount. It can be added to a term or whole life policy without the insured having to have a medical exam until a certain age, typically around 65 years old. Payouts from an accidental death rider may decrease after you reach a certain age, usually around age 70.

An accidental death benefit rider is often confused with an accidental death benefit policy, a different type of stand-alone life insurance policy that only pays out after death from certain types of covered accidents.

Certain occupations can exclude someone from qualifying for a multiple indemnity rider, even though they can be issued a standard life insurance policy. 

For example, a crane operator on high-rise building construction projects will be approved for a life insurance policy by most life insurance companies. Still, some of those companies will probably not approve him for the accidental death benefit rider because he is in a “high-risk occupation.” Likewise, law enforcement officers and firefighters are also generally considered high risk.

It should also be mentioned that there is another type of policy sold that is called an Accidental Death & Dismemberment Policy (AD&D). These policies cover fatal accidents and non-fatal injuries that prevent someone from working.

Pros and Cons of Multiple Indemnity Riders

There are several pros to having a multiple indemnity rider, and only one con that we can think of. 

Pros

  • It’s great “just-in-case” coverage. Accidents happen without a moment’s notice, and if you are accident-prone or have other types of circumstances that put you in harm’s way more than the average person, accidental death benefit insurance could be of great benefit to your family. 
  • It provides a bigger payout to your family. With a double indemnity rider, your life insurance becomes twice as valuable to your family if you pass away from an accident. They can use this extra money to pay your final expenses or pay bills and maintain the standard of living they’re accustomed to.
  • Multiple indemnity riders provide peace of mind. Knowing that you’ve doubled your family’s protection for a minimal premium can help you sleep better at night, knowing that you’ve taken steps to leave them as much money as possible if you die from an accident.

Cons

The one negative of a multiple indemnity rider is that they expire when many seniors die due to falling. Many seniors are active into their 70s and 80s and won’t have the same level of protection as they did in their younger years. It would be unfortunate to pay for this rider for many years, only to have it expire and not pay out after you die from an accident.

Can You Add a Multiple Indemnity Rider at Any Time?

Yes, you can add a multiple indemnity rider at any time to an existing term or permanent life insurance policy. More good news – you don’t have to undergo a physical examination when you add the rider.

Adding the rider at any time is an excellent feature because you don’t know when your life may change, and you would be more exposed to accidents. For example, suppose you trade in your desk job to become a full-time Uber driver and spend countless hours on the road. In that case, your chances of dying from an accident increase significantly, making it an opportune time to add the indemnity rider if your insurer offers it.

Who Should Consider an Accidental Death Benefit Rider?

Research conducted by the Centers for Disease Control and Prevention (CDC) has found that accidents are one of the five leading causes of death in the U.S., claiming more than 135,000 lives every year.

Certain careers and lifestyles can expose you to more dangerous situations, increasing the benefit of supplementing your standard insurance policy with an accidental death benefit rider. 

If you fall into one of these three categories, you should probably consider adding this rider:

  1. You work in a dangerous profession. This would include jobs like mining, construction, logging, hyperbaric welding, or others where work-related fatalities happen more often than other professions.
  2. You travel frequently. Unexpected weather or mechanical issues with aircraft or other modes of public transportation exposes frequent travelers to a greater risk of death when traveling. This rider offers an added layer of financial protection and security, whether traveling for your job or just personal leisure travel.
  3. You participate in dangerous hobbies. For example, riding a dirt bike, parasailing, mechanical bull riding – these are all things that don’t seem overly dangerous, but you suffer an increased risk of dying by accident if you participate in them. 

What Else Should You Know About Multiple Indemnity Riders?

We’ve covered a lot of ground, but there are a few extra details you should know about multiple indemnity riders.

Not all states allow life insurance companies to offer this rider. If you think this is a rider that you’re interested in, contact your life insurance provider and see if it’s available in your state.

The distinction between being a passenger or a pilot is crucial for this rider. While insurance companies will pay a benefit if you die while a passenger in an aircraft, they won’t pay a death benefit from a death resulting from being the pilot.

Is a Multiple Indemnity Rider Right For You?

You can’t go wrong if you add this rider. But, is it the best choice for you?

If you need to have double the protection of your standard life insurance policy, consider doubling the face amount of that policy instead of adding the rider. It’s more expensive, but the extra coverage won’t expire when you get older, and it will pay a death benefit not only if you die from accidental causes, but it will also cover you if you die from an illness, such as heart attack or cancer.

Read the Fine Print

There are quite a few terms and conditions, including exclusions, that come with a multiple indemnity rider. If you’re considering adding this rider, get all of the details, in writing, from the life insurance company you’re considering doing business with. Then, consider all of the angles before making a final decision.

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