In home insurance, ex gratia (Latin for “out of goodwill”) refers to a discretionary payment made by an insurer even though they are not contractually obliged to pay under the policy terms.
These payments are made on a case-by-case basis and usually reflect the insurer’s willingness to resolve a claim fairly in difficult or unusual circumstances, for example, to support a vulnerable customer, maintain goodwill, or avoid reputational harm. They are not admissions of fault or liability.
Examples of ex gratia payments
Out-of-scope claims
If damage occurred just before your policy began or shortly after it expired, and your home insurance claim is technically outside the coverage period, an insurer might still offer a goodwill payment, especially if the timing was marginal or unclear.
Ambiguity in policy wording
If your policy is vague or contradictory, and the insurer believes there’s a reasonable argument for cover, they may offer an ex gratia payment to resolve the dispute without setting a legal precedent.
Exceptional circumstances
Insurers may consider an ex gratia payment in hardship cases, for example, if a vulnerable customer suffers significant loss or if the insurer contributed to the problem (e.g. by giving unclear advice or making an administrative error).
What does an ex gratia payment mean for your claim?
An ex gratia payment is not a legal obligation or an acceptance of liability. Insurers typically issue these payments with clear terms, often asking you to sign an agreement confirming that the payment settles the matter and that it cannot be cited as precedent in future claims.
Accepting an ex gratia offer is voluntary. If you believe your claim should be covered under your policy, you may wish to challenge the decision instead.
FAQ’s
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Can I request an ex gratia payment?
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Yes. If your claim has been declined on technical grounds, but you believe there are mitigating circumstances or a moral case for payment, you can ask the insurer to reconsider on an ex gratia basis. While there’s no guarantee, such requests are considered seriously.
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Do I have to accept an ex gratia payment?
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No. If you believe the claim should be accepted under the terms of your policy, you can reject the offer and continue to dispute the decision, including referring the matter to the Financial Ombudsman if necessary.
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Will accepting an ex gratia payment affect future claims?
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Not directly. It won’t change your coverage or rights going forward, but insurers may keep internal notes about the reason for the payment. If you’re unsure about the implications, it’s sensible to seek independent advice.
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Can a Loss Assessor help negotiate an ex gratia payment?
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Yes. A Loss Assessor can help present your case clearly and highlight any relevant circumstances that might justify a discretionary payment, particularly where a strict policy interpretation seems unfair or unreasonable.
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Is an ex gratia payment taxable?
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Typically, home insurance claim payments, including ex gratia payments, are not taxable, as they relate to compensation for loss rather than income. However, you should check with a tax adviser if you’re unsure.
