Double Indemnity: Fact Or Fiction?

In the 1940’s, “film noir” style movies were very popular with audiences. One of the first, and best, was the movie Double Indemnity starring Barbara Stanwyck and Fred MacMurray, along with Edward G. Robinson.

MacMurray played an insurance salesman, Walter Neff, whose company was on the line to pay double insurance benefits in case of an accidental death. Seduced by Barbara Stanwyck’s nefarious character, Walter plots with her to make it seem that her husband's death was accidental – under rather murky circumstances – all so she could collect the double benefits. It is Edward G. Robinson’s character, the lead claims investigator, who uncovers the fraudulent scheme.

This great film was brought to mind by the questions I’ve heard recently from folks concerned that life insurance companies would not pay out due to specific circumstances, such as deaths due to COVID, substance abuse, suicide, and military action, as well as accidental deaths. These circumstances are all too common right now.

Setting aside the film noir aspects of Double Indemnity, let's look at the facts about insurance and clear up some misconceptions. Many people confuse Accidental Death and Dismemberment (AD&D) with regular life insurance. These policies are popular with travelers when flying,and are also added sometimes by rental car companies. However, an AD&D policy will never pay for deaths caused by illness, the hallmark of a regular life insurance policy.

Only as a rider (used for a specific additional benefit) could someone add a “double indemnity” accidental death benefit to a regular life insurance policy.

In the case of suicide, all life insurance policies would pay to the beneficiary the stated basic policy amount following the standard two-year effective period after the policy is issued. Of course, there would be no additional benefits for accidental death in this circumstance.

For substance abuse, if an individual purchased life insurance and had a drug, alcohol, or substance abuse problem when they applied for a policy, and an insurer knew about it, they may very well charge an additional premium at the time the policy is issued. However, when substance abuse is not disclosed to the insurer, claim benefits can be denied. If that person was driving a car and was killed while under the influence, there would be no double indemnity benefits due to the substance abuse.

With military and combat action, Americans serving in a military war zone may need to purchase a special life insurance policy to cover them so their beneficiaries would collect if they died in combat. There would be no additional accidental benefits as their situation places them in special or unusual circumstances. In most cases however, there would not be a “war exclusion” for life insurance.

As for COVID, no insurer in the United States would deny benefits to the beneficiary for a COVID illness or its complications.