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Excuse my pure ignorance on this matter, I barely understand the basics of any insurance. When I first moved to the UK years ago I have been told that I can't have life, health, car, contents insurance with more than one company at the same time. Can someone please tell me why?

My mobile is insured with the bank & Apple at the same time and probably I can even get it insured with the network I have a contact with as well. What I am missing here?

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+50

I worked for an insurance company for a long time in the United States, but we handled foreign risk as well.

In short, there's nothing generally illegal about doing it, although I'd add that there are many types of insurance and here in the United States insurance is regulated by states. So it's really not an overstatement to say that there are thousands of different insurance laws just in our country alone (50 states * N number of policy types).

From an insurance company point of view:

  • Just because you have two brokerages doesn't mean you aren't backed by the same insurance company. Rarely are you actually dealing with your "insurance company", generally you're just dealing with a broker. Tom and Frank might be two different brokers, but the policies you buy from them are both placed with the same insurance company (ie: the building with the money that pays the claims). As such, the insurance company requires it to be written into the policies that there is no other coverage.
  • Often if a policy allows for multiple coverage, it will require that the other policy(ies) pay first.
  • Insurance is often structured into tiers and there are reinsurance features as well, complicating exactly where your "insurance" is getting paid from. So even if you have two different brokers with two different insurance companies, the reinsurance for both of those might trace back to the same pile of money.
  • Insurance is based on a rather complicated set of actuarial tables (from insurance companies, not brokers) and the math breaks down with multiple policies and multiple payouts.

From a consumer standpoint, it makes sense to have multiple policies. But fundamentally insurance is there to pay a claim, not to allow you to profit handsomely from a claim. A $20K vehicle replacement fee should provide you with $20K, not $40K (two policies). From a regulatory standpoint, I think you can see the opportunity for fraud as well if one was allowed to get 2 or 50 policies.

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You were misinformed. There is nothing, legally, preventing you from simultaneously having multiple insurance policies which cover the same risk. In fact this can and does arise moderately often where different "off the shelf" policies have overlapping scopes (e.g. some home contents insurance policies cover items outside the home which may also be covered by a travel insurance policy).

However what you cannot do is profit by claiming for the same incident twice; e.g. if my camera is stolen whilst I'm on holiday I can't claim the price of a new one from both my home and travel insurers even if the terms of both policies mean both would cover me. Whichever company I put a claim to would normally ask me about other insurances which might be applicable, and then seek to split the cost with the other insurer.

For that reason it makes no sense to deliberately seek out multiple insurances for the same risk since you will be paying for something which is of no benefit.

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    How about life insurance policies? If two different life insurance policies from two different companies on the OP's life have the same beneficiary, will there still be a "coordination of benefits"? – Dilip Sarwate Nov 27 '15 at 14:56
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    @DilipSarwate good question. Life insurance is a special case. In general you can hold as much life insurance as you can afford and they will all pay out in full, assuming your death falls within the terms of each policy. I think it comes down to the fact that there is no agreed objective measure of the value of a human life, whereas most other insurances cover things for which ultimately there is a specific bill to pay. – Nigel Harper Nov 30 '15 at 13:44
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Let us look at an example:

You have a valuable copy of a Beatles Album, signed by all Four Beatles. It is valued at 10,000£. You decide to insure it, and the cost from company A is 50£ a year. A few years later you run into some money trouble and realize that you must sell it. But you also get the idea that if you insure it with company B and company C at the same time, for the small sum of 100£ you can get 30,000£ if you "accidentally" destroy it.

The excessive coverage make it more likely that a person may commit insurance fraud. The purpose of insurance is to protect you or your family from loss, it is not a way to make money. Each company thought they were insuring the entire value, but you were actually claiming that the album was worth triple that amount.

The same thing goes for health insurance, you can't send the same medical bill to more than one insurance company.

For large insurance claims expect that the paperwork that you fill out will make clear that what you are proposing to by submitting multiple claims is insurance fraud.

In some case multiple companies are involved with a larger incident. If the car is stolen and the Beatles album is in it, then the two companies will determine which policy covers what loss.

  • Thank you for your answer but how am I suppose to know when I can insure with two companies or not? – Ulkoma Sep 1 '15 at 10:25
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    @Ulkoma you can't insure the same risk with more than two insurers. I'm pretty sure your bank's small print will say that they're not actually insuring your mobile if you already had insurance covering it. – AakashM Sep 1 '15 at 10:42
  • @AakashM - I believe he(she) is talking about contents insurance and Apple at the same time. – DumbCoder Sep 1 '15 at 12:09
  • Medical bill is a bad example (in the US, at least). I could be covered under my policy and also under a partner's. In that case the bill would go to both insurers and they would apply "coordination of benefits" so that it doesn't get paid twice. – mkennedy Sep 1 '15 at 17:20
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The other answers explained why it would not help you to have overlapping coverage for property with multiple insurers.

With health - the insurance pays for a treatment, and you can't usually have the same condition treated multiple times, so if your insurance covers it - it will pay. You can still have multiple policies (although in UK there may be legal limitation since the government essentially is the insurer). Consider you have one policy that only covers emergencies, and another that only covers illness during travel. If you have a heart attack during travel - both will cover it, but the hospital where you'd be treated will ask for someone to pay, and will bill that one. You'll have to chose which of them to charge (or, as others have mentioned, the insurers will split the costs between them).

With life, however, there's a difference. You can have multiple life insurance policies, and you may get into a situation when you lose your life in an event covered by all of them. Unless explicitly stated otherwise in the policy, they will all pay. This allows you having multiple policies for different beneficiaries and different amounts.

For example, assuming you're a husband and a father, you can have one policy with proceeds going to the kids, another with proceeds going to the kids of the mistress, and the third one split evenly between the wife and the mistress, having them scratch each others' eyes out while dealing with the insurer because you actually hated them both, and have a fourth one for the guy you were actually in love with your whole life but didn't want anyone to know because your family would banish you. They will all pay, and they won't talk to each other or let the beneficiaries of the other policies know.

The reason for the difference is simple: you cannot put a price tag on one's life, thus you can never over-insure it.

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