{"id":34285,"date":"2021-08-12T10:57:46","date_gmt":"2021-08-12T05:27:46","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=34285"},"modified":"2021-08-12T21:32:07","modified_gmt":"2021-08-12T16:02:07","slug":"double-insurance-and-how-it-works","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/","title":{"rendered":"What is Double Insurance, and how it Works?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Double insurance refers to insurance where the same subject matter is insured twice or more than that. In such scenarios, the same subject is insured but with different insurance companies. The concept of Double insurance is not illegal at all. Double insurance come to light when a business avail insurance w.r.t the same risk and subject matter from two different insurers. This write-up will explore different instances where double insurance may occur and the real-life implications for businesses<\/p>\n\n\n\n<p><em><strong>Key\ntakeaway<\/strong><\/em><\/p>\n\n\n\n<ul><li>Double insurance isn\u2019t a critical problem; however, it can lead to insurance companies arguing about whether they have payout at all, causing an unexpected delay in the claim processing. <\/li><li>Double insurance should not be perceived from a coverage layering viewpoint. Layering is where insurance policies are placed with distinct insurance companies to safeguard different exposure levels. The first losses are addressed by one <a href=\"https:\/\/corpbiz.io\/insurance-company-license\"><strong>insurance company<\/strong><\/a> to the prescribed limit; above that limit, another insurance company will pay out up to the limit cited in that policy &amp; so on.<\/li><li>The first layer is generally known as primary;&nbsp;<em><strong>meanwhile, another layer is being referred to as excess.<\/strong><\/em>&nbsp;In such circumstances, there is no duplication or overlap of insurance as the excess insurer does      not have to dispense the cover until the limit on the underlying policy is paid completely by the primary insurer.&nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/#General_principles_of_Double_Insurance\" >General principles of Double Insurance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/#Clauses_pertaining_to_Double_Insurance\" >Clauses pertaining to Double Insurance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/#Double_insurance_Indemnity_insurance\" >Double insurance = Indemnity + insurance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/#Difference_between_Reinsurance_and_Double_insurance\" >Difference between Reinsurance and Double insurance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/double-insurance-and-how-it-works\/#Bottom-line\" >Bottom-line<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"General_principles_of_Double_Insurance\"><\/span>General principles of Double Insurance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>The first point on concurrent insurance is that, in principle, a business entity should not be left without an insurance payment. Where there is a presence of double insurance, &amp; a <em><strong>business<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Business\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> entity intends to claim w.r.t a loss covered by more than one policy, it will be entitled to claim whichever insurance policy it prefers.<\/li><li>The insurance company that does not dispense cover w.r.t the double insured risk can approach other insurers for the contribution which has rendered similar cover.<\/li><li>Therefore, if a business does claim under one insurance policy &amp; not the other, the insurance company that has not paid out probably has to pay a share to the insurer who has paid out.<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/factors-that-influence-corporate-governance-in-india\/\">Factors that Influence Corporate Governance in India <\/a><\/mark><\/p>\n\n\n\n<p><em><strong>So why this trigger issues for insureds?\u00a0<\/strong><\/em><\/p>\n\n\n\n<p>First, various insurance policies entail clauses that deter an insured from claiming under the insurance policy if another policy covers the identical loss. If one insurance policy entails this term, there are no issues because the insured can claim on another policy (The right of contribution will cease to exist between insurers as there is no double insurance).<\/p>\n\n\n\n<p>If\neither of the policies entails such a clause, then there is no issue for the\ninsured, as the clauses cancel each other &amp; the insured can claim in both\ninsurance policies for its loss (with the paying insurance policy claiming a\ncontribution right from another insurance company).&nbsp;<\/p>\n\n\n\n<p>The issue is that the term of these \u2018other insurance\u2019 clauses is not standard &amp; this can leads to disagreement between insurers as to which insurance policy should respond, leaving the business waiting for a claim.<\/p>\n\n\n\n<div class=\"shadow1\"><strong>Key takeaway:<\/strong> Having double insurance does not necessarily increase the coverage amount. So, it does not become viable to pay for more insurance than the insured needs. Additionally, double insurance can lead to disagreement between insurers &amp; delay in payment of a claim. It does make sense to examine the insurance and identify and discard unnecessary insurance cover.<\/div>\n\n\n\n<p><em><strong>When\nexamining double insurance, it is critical to look at the interest being\nsafeguarded and the property and the risk being insured against.&nbsp;&nbsp;<\/strong><\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Clauses_pertaining_to_Double_Insurance\"><\/span>Clauses pertaining to Double Insurance <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The legality of double insurance revolves around the following clauses: <\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Clauses-pertaining-to-Double-Insurance.png\" alt=\"Clauses pertaining to Double Insurance \" class=\"wp-image-34293\" width=\"544\" height=\"297\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Clauses-pertaining-to-Double-Insurance.png 998w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Clauses-pertaining-to-Double-Insurance-300x164.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/08\/Clauses-pertaining-to-Double-Insurance-768x421.png 768w\" sizes=\"(max-width: 544px) 100vw, 544px\" \/><\/figure><\/div>\n\n\n\n<p><strong>Escape\nclause:<\/strong>&nbsp;The escape clause allows the insurers to\nreject any claim request if they found that the insured is levering another\npolicy that renders the same benefits.&nbsp;<\/p>\n\n\n\n<p><strong>Notification\nclause:<\/strong>&nbsp;The notification clause mandates the insurer\nto make prior intimation to the insurer regarding the existence of the\nalternative policy, failing to which policy will be cancelled.&nbsp;<\/p>\n\n\n\n<p><strong>Excess\nclause:<\/strong>&nbsp;Excess clause talks about the disbursement of\nthe actual claim amount that comes out after subtracting the claim sum that\nalready has been availed by the insured from another insurer.&nbsp;<\/p>\n\n\n\n<p><strong>Rateable\nclause:<\/strong>&nbsp;This clause prevents insurers from dispensing\nthe entire claim amount to the insured in the case of Double insurance.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Double_insurance_Indemnity_insurance\"><\/span>Double insurance = Indemnity + insurance?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\nis important for the company to be cautious when contractual indemnities are\ngiven w.r.t the risk that the insurance company may also encompass.&nbsp;<\/p>\n\n\n\n<p>In\nsome scenarios, it is aimed that the indemnity is called on first with the\ninsured then claiming on insurance. For instance, with directors &amp; officers\nliability insurance, the entity is often needed to indemnify the directors\n&amp; then seek reimbursement under the insurance policy.<\/p>\n\n\n\n<p>But, in other scenarios, the indemnity may be aimed to be an alternative to the insurance. In these scenarios, make sure that the indemnity is not caught by \u2018other insurance\u2019 norms or that indemnity arrangement don\u2019t render insurers with scope to argue that there ought to be a contribution right by the insurer against the indemnifier.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_between_Reinsurance_and_Double_insurance\"><\/span>Difference between Reinsurance and Double insurance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\"><thead><tr><td>\n   <strong>Basis of\n   Difference<\/strong>\n   <\/td><td>\n   <strong>Double\n   Insurance<\/strong>\n   <\/td><td>\n   <strong>Reinsurance<\/strong>\n   <\/td><\/tr><\/thead><tbody><tr><td>\n  Meaning\n  <\/td><td>\n  In double insurance, the identical\n  risk is protected with distinctive insurers or more than one insurance\n  company \n  <\/td><td>\n  In the reinsurance, the risk is\n  transferred to another insurer. The risk remains the identical. \n  <\/td><\/tr><tr><td>\n  Subject\n  <\/td><td>\n  This insurance is predominately\n  secured for properties having a high worth. \n  <\/td><td>\n  This insurance encompasses the risk\n  of the original insurance company. \n  <\/td><\/tr><tr><td>\n  Claim\n  <\/td><td>\n  You can make a claim to all insurers\n  for compensation\n  <\/td><td>\n  In this insurance, claim is sought\n  from the original insurer &amp; it will claim from the reinsurer\n  <\/td><\/tr><tr><td>\n  Loss\n  <\/td><td>\n  The loss shall be shared by all the\n  insurers \n  <\/td><td>\n  The reinsurer shall only be entitled\n  to pay the proportion of the insurance.\n  <\/td><\/tr><tr><td>\n  Goal\n  <\/td><td>\n  The primary goal of double insurance\n  is to render the benefit of insurance.\n  <\/td><td>\n  The primary goal of this insurance\n  is to minimise insurer\u2019s risk. \n  <\/td><\/tr><tr><td>\n  Interest of Insured\n  <\/td><td>\n  The insured possess an insurable\n  interest in such kind of plan.\n  <\/td><td>\n  The insured lacks insurable interest\n  in such kind of plan.\n  <\/td><\/tr><tr><td>\n  Insured Approval\n  <\/td><td>\n  The insured authentication is required\n  in double insurance.\n  <\/td><td>\n  The insured\u2019s approval is not required\n  in Reinsurance since it is done from the end of the insurer. \n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bottom-line\"><\/span>Bottom-line <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>From a practical viewpoint, if an insured have double insurance, it may be inviting some complications for its insurance. There can also be delays prior to the disbursement of the claim if there are arguments between the insurance companies as to which policy should respond. Apart from interest, the insured shall be compensated for any losses it encountered as a result of such delay. In most scenarios, businesses may not seek overlapping policies. This is so that the insurance coverage is clear and any claims made under the insurance policy can be settles as promptly as possible.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/insurance-ombudsman-resolve-insurance-related-disputes-with-ease\/\">Insurance Ombudsman: Resolve Insurance-Related Disputes with Ease <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Double insurance refers to insurance where the same subject matter is insured twice or more than that. In such scenarios, the same subject is insured but with different insurance companies. The concept of Double insurance is not illegal at all. Double insurance come to light when a business avail insurance w.r.t the same risk and [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":34298,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[332],"tags":[1911],"acf":{"service_id":"115"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":46979,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34285"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=34285"}],"version-history":[{"count":23,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34285\/revisions"}],"predecessor-version":[{"id":34343,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34285\/revisions\/34343"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/34298"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=34285"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=34285"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=34285"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}