Sometimes a customer has two or more insurance policies that cover the same peril. A homeowner can inadvertently wind up with overlapping insurance, and it can lead to wasted money and frustration.
How Can You Have Overlapping Homeowners Insurance Policies?
You might find yourself with overlapping coverage if you switch homeowners insurance companies and your coverage dates overlap. Sometimes a homeowner finds a less expensive policy through a new insurer but forgets to cancel the old coverage or doesn’t realize that the first company automatically renews policies unless instructed not to do so.
What Happens If You Have Overlapping Homeowners Insurance and You File a Claim?
Policies contain “other insurance” clauses that specify how claims are handled when two policies apply. One policy may be considered primary, and the other secondary.
If you file a claim, the primary policy will compensate you for a covered loss up to that policy’s coverage limit. If that amount isn’t enough to pay the bills associated with the loss, the secondary policy will kick in and cover the difference. If you file a claim with one insurance company and it pays the bills in full, that insurer might in turn seek compensation from the other insurer for the portion of the claim that is its responsibility.
Often, it’s not entirely clear whether one or both insurers are responsible for paying a claim and how costs should be divided. Rules and legal precedents in the state where you live, as well as factors that are specific to your case, can influence the outcome. That can lead to administrative delays and frustration for you while you wait for the insurance companies to sort things out and pay your claim.
Can You Get Paid Twice for the Same Claim?
If you have overlapping insurance with two policies that cover the same peril, that doesn’t mean that you can file a claim with both companies for a single loss and get paid twice. Seeking full compensation from two insurance companies for the same loss is considered fraud.
Insurance is meant to compensate you for a loss and return you to the financial situation you were in before the loss occurred. You shouldn’t receive more than the amount of the loss and make a profit by filing an insurance claim.
How Can Overlapping Insurance Affect You Financially?
Having two homeowners insurance policies that cover the same property can cause you to spend more money than you need to on premiums. Insurance companies often reward customers who don’t file claims with discounts. If you file a claim and the bill gets divided between two insurers, you might find that your rates on both policies increase as a result.
