Dual insurance
Dual insurance (alternative term for double insurance) According to J. Clark: "dual insurance is insurance cover against the same risk with two different insurers. In practice, it is impossible to receive more than the value of the cover, and in many cases one insurer would require a contribution to the claim from the other insurer." [1].
The insured has the right to insure one particular aspect in many of insurers. The concept of double insurance aims to provide protection to the insured. At the time of the loss, the assured person may make a claim to more than one entity - covering the same loss with help of many insurers[2].
There are several reasons why an insured person should have dual insurance [3]:
- This is the only way to protect assured from insolvency. Applies to the moment when, due to insolvency, the insurance is taken out, without the knowledge of the assured, by another person.
- It is a protection against the possible rise of existing insurance costs.
- In the case of double health insurance, solvency for damages can reach nearly 100% of the actual value and even exceed it.
Requirements
Before using dual insurance, everyone interested should meet certain requirements. The first and the most important point is the need to cover the same property. The insurance-covered aspect does not necessarily have to be exactly the same thing. When two insurance policies cover the same risk, there is double insurance. Further, the policies must cover the same interest and the same security. The other rules are not that important and may vary depending on the type of policy[4].
Problems with dual insurance
The existence of double insurance causes a lot of problems. First and foremost, it is about adjusting the liability between the two insurers. The first attempts to solve such problems arose in the area of non-life insurance. At that time, it was common practice to include in the contract a provision that prohibited the insuring party from obtaining another benefit from another insurer. A whole range of regulations were created which regulated the ways of distributing losses between insurers[5].
At present there is a risk of fraud when the insured person takes out an insurance policy. By purchasing multiple insurance policies at the same time, assured person files claims in all of them. Provisions have been introduced to prevent excessive use of insurers by introducing restrictions to ensure that insured persons do not receive more than they are entitled to. Unfortunately, it is not clear enough what order the claim of insurers should be made. The contract has been defined as binding between the insurer and the insured - thus it covers only these two parties[6].
The laws that govern dual insurance are unclear. In some cases, when the same clause record applies to both policies. (e.g. such as escape clauses or excess or rateable proportion clauses) The courts dismiss the proceedings and the insurer is obliged to fulfill the contract [7].
Examples of Dual insurance
- Homeowners Insurance: Homeowners can purchase dual insurance policies to cover their home and its contents in the event of a disaster. By purchasing two separate policies, homeowners can ensure that their assets are fully covered in the event of a disaster.
- Auto Insurance: Drivers can purchase dual auto insurance policies to cover their vehicle and any passengers in the event of an accident. This allows drivers to protect themselves from high medical bills and other costs associated with an accident.
- Health Insurance: Dual health insurance can be used to cover both medical and dental expenses. This allows individuals to have comprehensive coverage for both medical and dental care, ensuring that all their health needs are met.
Advantages of Dual insurance
Dual insurance can provide several advantages, such as:
- Protection against a single insurer’s insolvency: Having two separate insurers for the same risk can provide financial security in the event that one of the insurers becomes insolvent.
- Increased coverage: By doubling the coverage, you are provided with a greater level of protection.
- Lower premium costs: By spreading the risk between two different insurers, the premium costs could be significantly lower than if the risk was covered by a single insurer.
- Access to wider coverage options: Dual insurance can provide access to greater coverage options than a single insurer, such as broader coverage for specific risks.
- Increased bargaining power: Having two insurers can provide increased bargaining power when negotiating terms with each insurer.
Limitations of Dual insurance
Dual insurance has several limitations, which should be taken into consideration when considering dual insurance as an option:
- Firstly, dual insurance can lead to duplication of premiums and double the cost of insurance.
- Secondly, dual insurance can lead to disputes between insurers over which policy should pay out in the event of a claim.
- Thirdly, dual insurance can lead to confusion over which policy should take precedence in the case of a conflict between the terms and conditions of the policies.
- Fourthly, dual insurance can lead to the possibility of double the excesses and double the deductions.
- Fifthly, dual insurance can lead to the potential for double the costs of administration, as both insurers will need to be contacted in the event of a claim.
- Lastly, dual insurance can lead to difficulty in maintaining consistent policy limits and coverages, as each insurer may have different terms and conditions for the same coverage.
Dual insurance is a form of insurance in which two or more policies are in place to cover the same risk. Other approaches related to dual insurance include:
- Reinsurance: Reinsurance is a form of insurance that is purchased by an insurer to protect itself against a large financial loss. The reinsurer will cover all or part of the insurer's risk, allowing the original insurer to spread its risk and reduce its potential losses.
- Coinsurance: Coinsurance is a type of insurance that requires the insured to pay a portion, or co-share, of the covered expenses. This means that the insured will pay a percentage of the total cost of health care services, while the insurer will pay the remainder.
- Contingent Insurance: Contingent insurance is a type of insurance that provides coverage if a specific event or condition occurs. It is generally used to provide coverage for losses that are not covered by other types of insurance.
In summary, dual insurance is one approach to managing risk and there are other options such as reinsurance, coinsurance, and contingent insurance. Each of these options has different advantages and disadvantages and should be considered when making decisions about risk management.
Footnotes
| Dual insurance — recommended articles |
| Subrogation waiver — First party insurance — Average clause — Indemnity principle — Negative easement — Insured peril — Insurance cover note — Indemnity bond — Tenancy at Will |
References
- Parsons T., (2004), The Political, Personal, and Property Rights of a Citizen of the United States: How to Exercise and how to Preserve Them,"The Lawbook Exchange",p.586-591
- Rose F., (2013), Marine Insurance: Law and Practice,"CRC Press", p.612-622
- Zimmerman J., (2010), Regulating the Business of Insurance in a Federal System, "SUNY Press",p.107-110.
Author: Sabina Łach
