Double insurance arises when the same person is insured on more than one policy against the same event and for the same time with the same insurer against the same subject matter. It is often used to insure home contents, such as furniture, electronics, jewelry, appliances, clothes, and other similar items. However, double insuring is also used for life insurance policies, annuities, and many other types of policies. So why is it important?
What is Double Insurance?
Double insurance happens where the same individual is covered by two or more insurance companies for the same category of coverage and at the same time against the very same risk. This is not a normal double insurance policy, but rather a unique policy that has been created specifically for this situation.
In order for such a policy to be created, there are certain conditions that must be met. These conditions must be met in order for you to be eligible for a double insurance policy. These conditions are detailed in the form of a written contract between the insurer and the individual seeking the coverage.
Benefits of Double Insurance
Survivor can Make a Claim
With double insurance the insured can be insured against two or more risks. For instance, if the insured’s partner or sibling dies, the survivor can make a claim on the policy for their shared possessions. The claim would be covered by both insurers and the premiums paid would be divided between them. If this were repeated over several years, the insurers would gain an interest in the property so that they could claim a larger sum.
Combined Face Value
One of the most common ways to insure multiple people against the same event is through “rateable proportion clauses”. For instance, assume you insure your friend against the death of a member of the family. In order to calculate your insurance, you multiply the amount of liability by your friend’s age.
This is known as the amount of combined face value. If this were repeated over several years, you would end up with a lot of money because the premium would change constantly based on your definition of a combined face value.
- “Escape clauses” are sometimes used to protect the insurer by allowing them to recover the costs of any loss from the liable party in the event that they lose the case and there is no claim. An example of escape clauses is where a claim is made for negligence which causes the death of an individual. The insurer may use “guaranteed indemnity” or “adequate” damages to avoid paying out in the event they lose. However, they still have to cover their own costs.
- Many people are unfamiliar with the term double insurance clauses. A typical example would be a homeowner who lives in a house built on land with a mortgage loan. As time goes by and the mortgage loan is paid in full, the homeowner receives a bill for all of the outstanding property taxes. If she still lives in the home, she is not required to pay these taxes, but if she decides to move, she has the option of purchasing another home and paying the taxes from her new home.
- All insurance policies are subject to state laws. Some states have statutory minimum coverage while others require that policies offered to be sold with a specific dollar amount of money. In addition, some states have regulations regarding how the policyholder can renew a policy. Many times, policies are renewable every year. Some people are under the impression that the renewal dollar amount is determined by an annual formula but that is not the case.
- The final category is professional liability insurance. Professional liability insurance protects contractors and architects that perform work on homes or buildings. Many states require building contractors to carry this kind of insurance so that they are protected against negligence claims. There are several ways that building contractors can receive discounts on their insurance policies.
Guaranteed Issue Contracts
- Many different types of insurance policies can be written for companies of all sizes. They can be lump sum, individual policies for a number of different businesses. Larger insurers often use “guaranteed issue” policies where there is no formal contract between the insurer and the building contractor. These type of policies normally come into force once the building contractor has paid the policy.
- Other types of “guaranteed issue” contracts often come into force when a claim for compensation is made. These include payment claims for injuries that happen during work, accidental death claims, compensation claims made under the provisions of the worker’s compensation etc. where the workers are members of a union or employee association. However, even if the construction company has no official representative, it is likely that they will have agreements with other contractors who work within their premises.
- Some contracts for buildings may also include a double indemnity or excess clause. The excess clause states that if there is a loss or damage to a property which is not the responsibility of the insured then the first insurance policy will be liable to cover the difference. If however, the first insurance policy is paid out then the property is covered by the second policy.
There are other double insurance policy clauses, which are used to protect the insurer in specific circumstances. For example, there might be a time when the insured should know that something would happen to the property on which the work was being carried out.
This might happen on site or at another site but the first policy should protect against anything that happens while the building is being carried out. The second policy would then protect against anything that happens after the project is complete. Where two companies to build the same building, one of these companies could insure the site as well as the building.
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