Ex Gratia literally means “an act of grace.” When an insurance company receives a claim from an insured person the first thing they will do is to confirm that the event which gave rise to the claim is indeed covered by the insurance policy. If, for example you took out third party only car insurance and your car is written off in an accident, you cannot claim your loss from the insurance company, they will only cover the damage to the third party’s car.

Should an insurance company decide to make a payment towards a claim that is not covered by the policy it is called an Ex Gratia payment. An Ex Gratia payment can either be for the full amount of the claim or, more likely, for part of the claim. The insurance company has no legal liability to make any payment in terms of the policy wording. When an insurance company decides to make an Ex Gratia payment it is done as a favour, the payment is made for “goodwill” purposes. Such payments are made without any admission of liability and without waiver of right by the insurance company.