Insurance is a kind of contract that provides financial protection against future risks. It is a kind of contingent contract that provides a safeguard to oneself and one’s assets against any future uncertainty. Contingent contracts are based on the happening and non happening of a particular future event. In general, there is one insurance for one thing. However, there are some circumstances in which a person could unintentionally or purposefully obtain multiple insurance policies for the same item or piece of property. Double insurance is what this is known as, and it may have legal repercussions. In this article, we will discuss in detail multiple insurances in India.
What is Double Insurance?
Double insurance is a condition where a person ensures the same asset or property with two or more insurance companies. When someone forgets about an existing policy and obtains a new one for the same asset or property, this can happen accidentally. Another condition can be that a person intentionally takes out multiple insurance policies to increase the payout in case of a claim. The insured is considered to be over-insured by multiple insurance when two or more policies are executed by or on behalf of the insured on the same adventure and interest, or any portion thereof.
Governing Law for Double Insurance in India
The Insurance Act, of 1938 mentions under Section 45 the regulating provision for multiple insurances. This clause mandates that the insured person provide the insurer with accurate and complete disclosure of all material facts pertaining to the insurance policy. Insured is one who is taking an insurance policy and the insurer is one who is providing or giving an insurance policy.
It is referred to as double insurance if a person protects the same asset or property with more than one insurance provider. The insured person is required to reveal this information to both insurance providers at the time of obtaining the policies. If this isn’t done, the insurance coverage can be canceled or voided, and the insured individual might face legal repercussions.
Non-Disclosure of Multiple Insurance
If an insured person does not disclose prior insurance at the time of taking the same policy from another insurer for the protection of the same thing, then he or she might have to face legal consequences. These legal consequences include but are not limited to the following:
- The policy may be canceled or become null and void
- Legal action may be taken against the insured person.
- In the event that a claim is filed under two insurance policies, the insurers may decide to divide the claim payment according to their respective ownership stakes in the insured property.
- The insured person may only be entitled to the maximum amount of the loss caused, as per the terms and circumstances of the policy, if the insurers cannot come to an agreement.
Clauses Under Multiple Insurance Policies
Under an insurance policy, there are many clauses, related to multiple insurance. If a claim is made for multiple insurance, insurers may decide to split the claim amount. They can split it as per the respective stakes in the particular insured asset or property. The insured person may only be entitled to the maximum amount of the loss incurred, to the extent authorized by the terms and circumstances of the policy, in case insurers do not agree. Under Indian insurance laws, multiple insurance is governed by certain clauses that prohibit it. Those clauses include the following:
- Escape Clause
- Notification Clause
- Excess Clause
- Rateable Clause
Accidental Vs. Intentional Double Insurance
Multiple insurance in India can be of two types. One can be accidental and the other can be intentional. Let us discuss the difference between both of them through the table given below:
| S.No. | Accidental Double Insurance | Intentional Double Insurance |
| Occurrence | Unintentional mistake | The deliberate act of fraud |
| Insurance Outcome | Entitled to a payout from both insurance companies, but limited to the actual value of the asset or property being insured | The policy may be canceled or voided; no entitlement to payout |
| Legal Consequences | Unlikely | Possible legal consequences for the insured person |
| Ethical Implications | Unintentional mistake with no fraudulent intent | Deliberate act of fraud, unethical behavior |
| Insurance Company Response | Payouts made by both insurance companies up to the policy limits; coordination between insurers to avoid overpayment | Investigation and potential legal action against the insured party; policy cancellation or voidance |
| Penalties | Nothing will be done against the law hence there will be no such penalty | If an insurance provider learns that a person has purposefully obtained numerous policies, they may launch an investigation and ask the insured to give proof that they did not commit fraud. If the insured individual is proven to have committed fraud, they may be punished with fines and/or jail. |
Does Multiple Insurance Increase Payout?
It’s critical to realize that purchasing additional insurance coverage for the same item or property will not result in a higher claim settlement. Insurance plans are not intended to create a windfall profit; rather, they are intended to indemnify the insured individual against the real loss suffered.
The total payout cannot therefore exceed the real worth of the asset or property being protected if a person has purchased multiple insurance policies for the same asset or property. The overall savings from insurance could be lessened as a result of many insurance policies because they might result in higher administrative costs and premiums.
Conclusion
Double insurance in India involves insuring the same asset or property with two or more insurance companies, either unintentionally or purposefully. While accidental multiple insurances stem from oversight, intentional multiple insurances is a deliberate act of fraud. Having multiple insurance policies does not lead to increased payouts; insurance aims to indemnify actual losses, and the total payout cannot exceed the asset’s value. Multiple policies can lead to administrative issues and delays in claim processing. To ensure efficient and swift claims resolution, businesses usually opt for clear and non-overlapping insurance coverage.
