PSI Ohio Insurance Practice Exam

What is it called when a life insurance policy pays a multiple of the coverage amount when certain types of accidents occur?

1. Multiple indemnity

2. Single indemnity

3. Double payout

4. Accidental benefit

The correct answer is: Multiple indemnity

The term used when a life insurance policy pays a multiple of the coverage amount due to certain types of accidents is known as multiple indemnity. This feature is specifically designed to provide additional financial protection for beneficiaries if the policyholder dies as a result of an accident that meets the policy's criteria. Multiple indemnity typically applies to specific circumstances, such as accidental death, where the insurer pays out more than the standard death benefit. For example, a policy might pay double or triple the amount of coverage in the event of accidental death. This feature reflects the heightened risk associated with untimely death due to accidents and aims to provide extra support to beneficiaries in such tragic scenarios. The significance of this provision underscores the insurance industry's role in addressing the financial impact of unexpected events. The other options do not accurately represent the multiple payout aspect of accidental death benefit provisions. Single indemnity does not involve any multiplicative payout. Double payout and accidental benefit are not standard terms in insurance terminology. Thus, multiple indemnity correctly encapsulates the concept of enhanced benefit payouts in situations involving accidental death.