Can I Buy Multiple Insurance Policies for the Same Risk?

For most people, insurance is not the most exciting topic of conversation. As a result, most people attempt to get their insurance purchases over as quickly as possible. They also typically only carry insurance when it’s required, and when it is, it’s usually one policy per exposure/peril.

Why Do People Buy Multiple Insurance Policies?

However, there remain people that want to do everything they can to gain peace of mind and ensure they are covered. This is when the idea of multiple insurance policies can come into play. Whether its multiple auto, home, health, life or business policies, this article will walk through a few things you should consider before trying to obtain multiple insurance policies for the same exposure.

Multiple Insurance Policies – Is it Worth Buying?

Those who look to buy multiple insurance policies are typically looking to extend coverage either through increasing the amount of perils that are covered, or amplifying the limits incorporated in the policy. It’s generally illegal and considered fraud, to purchase multiple insurance policies in efforts to enrich oneself; formally defined as ‘unjust enrichment.’ Insureds cannot profit from a loss, thus, a carrier will never payout more than the amount of loss.

In addition, policies typically include a clause which stipulates how it will respond should the insured carry another insurance policy which covers the same risk. Their response can vary from there being no coverage, to the insurance companies splitting the payout for the risk equitably.

Do Insurance Types Affect Buying Multiple Insurance Policies?

Before purchasing that second insurance policy, make sure you review the nuggets below:

AUTO INSURANCE

Similar to other insurance policies, you can not stand to profit from the loss of your vehicle.
When there is duplicate coverage, each carrier assesses their insured’s insurable interest, and pay out a potential claim accordingly.
When duplicate coverage MAY be acceptable:
- You just purchased a car, and the dealership provides off-lot temporary coverage. This coverage may lapse with your auto policy, when you ultimately get to purchase it.
- You share a car with a family member or friend.

HEALTH INSURANCE

Attempting to obtain multiple payouts for the same claim is considered ‘double dipping’ and is unlawful.
Two health policies are often more expensive, and you end up paying for duplicate/overlapping coverage.
Duplicate coverage is more common in health than other insurance verticals. Carriers typically go through a process labeled ‘coordination of benefits’ to ascertain which carrier is primary vs. secondary regarding payout.
Examples when an insured has duplicate health coverage:
- A child that is under 26 years of age, and is covered under their parent’s policy, and through their employer.
- Married couple that are each covered under each other’s employer plan.

LIFE INSURANCE

There’s a formal strategy within life insurance whereby you purchase duplicate policies in efforts to obtain more coverage at a cheaper price over the life of the policies. The strategy is labeled ‘stacking.’ It involves layering term policies (10 year, 20 year and 30 year) whereby the total cost over the life of all policies is less than the alternative, typically whole life insurance. In addition, coverage decreases as you age and your overall debt (and other liabilities) decrease.
Note that although purchasing duplicate life insurance policies is generally accepted, your requested coverage still must remain reasonable and cannot be artificially inflated.
In efforts to prevent fraud, all life insurance carriers report their applications to a centralized repository, called the Medical Info Bureau. This provides each carrier the opportunity to ensure that a potential applicant isn’t attempting to increase their payout for personal gain.

HOME INSURANCE

Although an insured ultimately cannot collect more than the amount of damages, duplicate home insurance policies are accepted.
Typically, duplicate policies are purchased to address gaps in coverage from one particular policy. This option is typically quite expense, and often times it is more cost efficient to have one carrier simply endorse their policy to provide the requested added coverage.
Home insurance carriers also utilize a centralized repository, the Comprehensive Loss Underwriting Exchange, to limit fraud and to ascertain which carrier would provide primary vs. secondary coverage.

BUSINESS INSURANCE

Given the intricacies of commercial insurance and the fact that there are several different products, people typically are not actively looking to purchase duplicate business policies.
Those few times when an insured is seeking duplicate commercial insurance coverage, take note that due to the very nature of the product, attempting to mesh two different carriers’ policies together could actually create coverage gaps, and make it increasingly difficult to endorse either policy. Thus, in efforts to increase coverage, you may end up adding exposure.

Your Takeaway

Although buying multiple insurance policies for the same exposure is not common, for those that are genuinely looking to do so in efforts to gain a better peace of mind, through expanding their coverage, make sure you refer to the points described above. Layering insurance is typically expensive, so make sure you shop around prior to making your purchase!