4

It is not only possible, but often encouraged to have more than one life insurance policy (for example, the first term policy you have, plus a new one as your financial needs have changed, plus one at work, plus one that may come "included" with your credit union membership, etc).

Why can you not have more than one car or homeowners' insurance policy with different carriers? For example, why not have a policy with Allstate and State Farm on the same property?

What is the legal reasoning behind such a rule at the state level in the US?


Note - this is not a question of whether or not it makes financial sense to the potential holder of said policies.

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    Depending on your philosophical standpoint in life; goods can be destroyed and replaced, people cannot. This is why goods cannot be insured multiple times and the value of a life is seemingly limitless. – MonkeyZeus Mar 9 '16 at 21:01
3

You can have more than one insurance policy. They all have clauses related to "coordination of benefits". That clause basically says you can't be reimbursed twice for the same property.

Property X has value Y, you can't have two carriers pay you Y. One or both of the carriers involved will offset their payment based on the other carrier(s) payments to you. If a state issues legislation to curb or stop the practice of carrying multiple property policies it's likely to relieve the courts of determining carrier liability on a claim. It's more likely that carriers refuse to write the coverage if another carrier is involved to not ever have the liability argument.

  • with life insurance policies (at least the ones I have), they all pay the face value in the event of my untimely demise – warren Mar 8 '16 at 21:53
  • The last paragraph of this answer is mostly incorrect. – Dilip Sarwate Mar 9 '16 at 2:00
  • @DilipSarwate Rearranged the last paragraph, somehow I was thinking about disability insurance while I was typing. – quid Mar 9 '16 at 2:11
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    An important point here is that, unlike with houses, cars, &c, there's no real way to put a fair market value on someone's life. – jamesqf Mar 9 '16 at 4:01
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    Good answer, but "double indemnity" should be "coordination of benefits". "Double indemnity" means that the beneficiary of a policy gets paid double the amount of the policy under some circumstances. "Coordination of benefits" means that payouts from multiple insurance policies will be coordinated so that you don't get paid more than once for the same loss. – Pete Becker Mar 9 '16 at 19:09
4

There is another good reason. If you were able to insure the same house/car twice, you'd have really high incentive to burn it down (house) or let someone steal it (car), as you'd actually get a profit. Companies don't want to 'incentivize' that.

2

I can think of two potential reasons from a policy perspective.

  1. Consumer protection. If there's no advantage from a consumer perspective to holding two insurance policies, let's prevent aggressive insurance agents from over-insuring consumers.

  2. Determining liability. Let's not waste the time of the courts settling disputes between insurance companies as to who is liable to pay claims.

I suspect this is allowed in the case of medical insurance because the health policy is tied to work in the US. Here primary/secondary policies are tolerated.

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    But you can't get two primary polices can you? Last I checked, secondary policies (per dollar provided) are a poor deal compared to primary and if you could get two primary policies it would make more financial sense, assuming you got reimbursed directly. – Michael Mar 9 '16 at 5:25

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