While intentionally taking out multiple insurance policies on the same asset or risk is called double insurance, there are situations where policyholders can inadvertently end up with overlapping coverage. This occurs when separate policies end up covering the same damage or loss.
Double insurance is usually not necessary and leads to wasted premium dollars. Here are some common examples of how consumers may unexpectedly get duplicate insurance protection.
Auto Insurance Double Coverage Scenarios
With auto insurance, double coverage overlaps can occur in a few typical situations:
You drive someone else’s car: If you drive another person’s car with their permission, you likely have liability protection under both your auto policy and the owner’s policy. Both policies would respond in the event of an at-fault accident.
Leasing or financing a car: When leasing, the leasing company requires you to have coverage but also carries their own insurance on the vehicle. If financing, the lienholder also has an interest in maintaining coverage.
Rental cars: Most personal auto policies extend liability coverage to rental cars, but the rental company provides insurance as well. Damage waivers and supplemental liability coverage offered by rental companies are usually unnecessary extras.
Teen drivers: Children on your policy are covered by your auto policy. But once they start driving, they should have their own policy with liability protection. Two policies covering the same young driver is redundant.
Moving to a new state: When transitioning between policies, you may end up with overlapping coverage from your old insurer before new state coverage kicks in. Notify prior carrier of cancelation date to avoid double payments.
Reading auto insurance contracts closely and communicating coverage changes to insurers can help avoid unneeded double coverage.
Home Insurance Overlap Scenarios
Homeowners can also end up with two policies covering the same property risks:
Condo owners: Purchasing a separate HO-6 policy when the master condo association policy also covers your unit. Condo owners should only buy liability and coverage for interior upgrades/possessions.
Spouses: If you and your spouse each hold separate home insurance policies on the same residence, it results in duplicate coverage. You only need one homeowners policy listing both spouses.
Mortgage lender: Lenders often have their own insurance to protect their financial interest, but this does not replace the need for you to have your own policy.
Renters: Renters don’t need extra insurance if the landlord’s policy sufficiently covers the dwelling. But renters still need coverage for personal belongings and liability.
When you shop for homeowners insurance, inquire about what group policies may already be in place to avoid unnecessary double coverage.
Health Insurance Duplicate Scenarios
With health insurance policies, unintended double coverage situations include:
Spouses: Spouses may each have an individual policy along with dual coverage under an employer-sponsored family plan. Coordinating coverage avoids duplication.
Children: Children covered under family plans of both parents have duplicate coverage. Coordinate which parent’s policy takes priority.
Employer and Marketplace: Don’t maintain separate individual and group health plans. The group plan should take precedence.
Medicare and Marketplace: Once eligible for Medicare, drop Marketplace plan to avoid overlap. Medigap policies only supplement Medicare.
COBRA extension: Taking COBRA coverage from a prior employer overlaps with new group health insurance. Pick one or the other.
Health insurers rarely cover the same claims, but gaps in coordination of benefits can lead to double coverage.
Life Insurance Overlap Scenarios
With life insurance, common duplicate coverage scenarios include:
Individual and group life: Individual life purchased on top of a group life policy through employer. Evaluate total coverage needed from all plans.
Spouses: Each spouse takes out life policy naming the other as beneficiary. Must coordinate and consider needs jointly.
Parents and children: Parents cover children as dependents, but adult children later buy their own policy without informing parents.
Policy transfers: Keeping an old life policy after purchasing a new one. Should formally cancel the old coverage.
Policies from multiple insurers: Purchasing life policies from different insurers at different times without consolidating coverage.
To avoid redundant life insurance, review all policies at once to see combined coverage amounts and make adjustments as needed.
How Double Insurance Affects Claims
When double insurance exists, it can complicate the claims process. Each insurer may try to limit liability by arguing the other provider should pay first. This can lead to:
Delayed payouts as insurers dispute responsibility.
Inability to collect full amount if exemptions like non-contribution clauses are invoked.
Need to coordinates benefits across providers.
Challenges determining which policy’s limits apply.
Increased litigation costs.
Possibility of reimbursement disputes between insurers.
While rare, duplicate coverage causes headaches at claims time. Tidying up insurance overlap issues when policies are purchased avoids problems later.
Is Double Insurance Ever Useful?
In most cases, duplicate insurance just raises costs without enhancing protection. But there are a couple scenarios where intentional double insurance may make sense:
Insuring high-value assets with multiple carriers to maximize likelihood of full payout in the event of a major loss.
Divvying up coverage of a high-value asset between specialty insurers focused on different perils, such as flood and wind policies on coastal homes.
However, these cases represent exceptions. For most people, maintaining duplicate insurance simply squanders premium dollars on redundant coverage. Careful policy management helps minimize overlapping protection.
How to Avoid Double Insurance
Here are some tips to help organize your policies and reduce chances of unneeded double insurance:
Maintain an insurance inventory documenting all current policies and key details like limits and deductibles. Review this checklist when considering adding new insurance.
Consolidate insurance records into one place to more easily compare plans side-by-side.
Discuss insurance needs with family members and review coverage jointly. Coordinate who should be primary insured on each policy type.
Inform insurance carriers about major life changes like marriage, new family members, or new addresses. This prompts updates to avoid overlaps.
Review policy renewals and statements carefully to look for duplicate premium charges or overlapping coverage.
Ask insurance providers direct questions about how new policies integrate with your existing coverage. Don’t assume.
Staying organized around insurance and open in communicating with family and insurers helps avoid the wasted expense of double coverage.
Frequently Asked Questions
Is double insurance allowed?
Yes, nothing legally prohibits someone from taking out multiple insurance policies on the same asset or risk. But in most cases, double insurance is redundant and not recommended as it leads to excess premium costs.
What happens if you have double insurance and file a claim?
Duplicate policies complicate the claims process. Insurers may dispute who should pay or try to limit liability. It can lead to delays, reduced payouts, coordination issues, and increased litigation expenses.
Can you have two home insurance policies?
You can technically have two policies on your home, but this is almost always unnecessary double coverage. Premiums are wasted on redundant protection. The lone exception might be separating flood and windstorm policies for homes in coastal regions.
Is it bad to have two health insurance plans?
Carrying two health plans – like through an employer and the ACA Marketplace – results in an inefficient overlap. You generally want to coordinate coverage so doctor’s visits and claims route through one primary insurer to keep things simple.
What happens if you have double car insurance?
Double car insurance could apply if a married couple insures both spouses’ vehicles separately or adult children maintain their own policies after joining the family plan. Premiums are wasted on redundant coverage. Liability claims may be disputed and require coordination.
Can I cancel double insurance?
Double insurance cannot simply be canceled mid-policy term unless a qualifying life event allows it. You must wait until the end of the current policy period before dropping redundant policies. So it is wise to avoid double insurance at the time of purchase when possible.
Double insurance causes unnecessary confusion and expense in most cases. Staying organized around your insurance portfolio and communicating coverage needs clearly helps avoid duplicating protection across multiple policies.
How does double insurance work?
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What is dual insurance?