What is the term for a payment made by an insurer without legal obligation as a gesture of goodwill?

An ex gratia payment is a payment made by an insurer voluntarily, without admitting legal liability or acknowledging that the policy requires the payment.

The phrase comes from Latin and means “by favor” or “as a matter of grace.” In insurance, an insurer might offer an ex gratia payment when a claim falls outside the policy wording, but compassionate circumstances, customer relations, or unusual hardship persuade the company to pay something anyway.

It is not the same as a settlement, indemnity, or reimbursement. A settlement usually resolves a disputed legal or contractual claim; indemnity compensates a covered loss; and reimbursement repays an expense under an applicable obligation. An ex gratia payment is discretionary and does not normally create a precedent for future claims.

The payment also does not necessarily mean the insurer agrees that the claim was valid. Policyholders should therefore check the accompanying letter carefully: accepting the money may involve conditions, and the payment may be expressly stated not to alter the policy terms or admit liability.