Dual insurance is a phrase that is commonly used in the insurance world, and you’ve probably heard it discussed when the topic of insurance comes up.
It’s essentially the idea that you take out multiple insurance policies covering the same type of risk on the same subject, whether that’s a car, a house or a gadget for the same period of time.
A great example of when dual insurance can occur is when you’ve specifically insured your personal possessions when going on holiday through an extra gadget cover add-on, whilst also being covered for the same thing on your home insurance, and having the exact same risk covered through a travel insurance policy included with your bank account.
Without even trying, you’re now covered for the same thing under multiple policies – dual insurance is well and truly in place.
It’s very unlikely that dual insurance is put in place on purpose and often happens by accident.
One of the most common myths associated with dual insurance and the aspect of it you’re probably most likely to be aware of is that it is illegal to be insured twice.
The act of dual insurance itself is not illegal – otherwise thousands of holidaymakers each year would facing hefty punishments.
It is, however, fair to say that payouts can become complicated when dual insurance is in place.
Taking motor insurance, for example, if you have to make a claim, you are entitled to what is known as “restitution in full”. This means that you are put back into the position you were in prior to the accident – whether this is getting a pay-out for the car, or getting it fixed etc.
If dual insurance was in place, you wouldn’t be able to make a claim twice on the two separate policies, for example getting one insurer to pay-out for the car while getting the same car fixed by the second insure as this would result in more than “restitution in full”.
Instead, this is known as “betterment”, essentially the insurers would be putting you back into a better position than you were prior to the incident, this is considered as fraud and would, therefore, be illegal.
This, of course, doesn’t work the same way for policies such as home insurance policies which promise to replace an item on a “new for old” basis if you make a claim. This type of “betterment” is promised in the policy wording and is therefore not considered fraud.
Temporary insurance is a prime example of where one subject – your car or a friend or family members car would be covered under multiple policies for the same thing. One short term insurance policy and one existing annual policy, both usually with fully comprehensive cover.
Having two policies running concurrently on the same vehicle through Tempcover would not be considered dual insurance, as the majority of the time you would be insuring a separate policyholder on the vehicle or insuring the vehicle under your name for business use, where your annual insurer wouldn’t quote.
There’s no need to worry about dual insurance or fear that it’s illegal to have multiple insurance policies in place – as long as you’re not using dual insurance to try and get more than you had at the beginning of course!