Is it Illegal to Have Two Home Insurance Policies?

Having two home insurance policies for the same property is not illegal, but it can create unnecessary complications, increased costs, and potential claim disputes. Understanding how multiple policies interact is crucial to ensuring proper coverage without financial waste or legal issues.

Can You Legally Have Two Home Insurance Policies?

Yes, legally, a homeowner can purchase two insurance policies for the same property. However, insurance companies generally discourage this practice, and having double coverage does not mean you will receive double the payout in case of a claim.

Most insurance policies contain a “pro-rata” or “other insurance” clause, which prevents policyholders from claiming the full amount from both insurers. Instead, the claim amount is divided between the two companies, which can complicate the claims process and delay payouts.

Why Having Two Policies Can Be Problematic

While it might seem beneficial to have extra protection, multiple home insurance policies often lead to issues such as:

1. Higher Costs Without Added Benefits

Each policy requires premium payments, and having two policies means you are paying twice for coverage that does not double your payout. This can lead to unnecessary financial strain.

2. Delays in Claims Processing

When two insurers are involved, each company may try to shift responsibility to the other. This can create disputes, delaying claim settlements and causing frustration when you need funds quickly for repairs or replacement.

3. Potential Claim Denials

Insurance companies include anti-fraud clauses in their policies, and attempting to claim from multiple providers for the same loss could be seen as an attempt to profit, leading to denied claims or even policy cancellations.

4. Coordination of Benefits Issues

In some cases, insurers may apply the “contribution clause,” meaning both companies split the claim payout proportionally based on policy limits. However, determining how much each company owes can be complex, requiring additional paperwork and communication.

When Two Policies Might Make Sense

While double coverage is typically unnecessary, there are a few scenarios where having multiple policies may be useful:

• Lender-Required Insurance & Homeowner’s Policy: If you have a mortgage, your lender may require you to carry a policy, even if you already have coverage. This often happens when a forced-placed insurance policy is added by the lender.
• Specialized Coverage Needs: Standard home insurance policies may not cover specific risks, such as flood or earthquake insurance. In such cases, having an additional policy designed for those specific risks can be beneficial.
• Landlord vs. Tenant Insurance: A landlord may have insurance covering the structure of a rental property, while the tenant carries a separate renters insurance policy to cover personal belongings.

How to Avoid Problems with Multiple Policies

If you’re considering an additional insurance policy or accidentally have two policies in place, take the following steps:

1. Review Your Current Coverage: Check your existing policy to see if it provides the protection you need before purchasing a second policy.
2. Notify Your Insurance Provider: If you have multiple policies, discuss with your insurer how they handle dual coverage to avoid claim disputes.
3. Cancel Unnecessary Coverage: If you unintentionally have two overlapping policies, cancel one to prevent extra expenses.
4. Consider Umbrella Insurance Instead: Instead of duplicate coverage, consider an umbrella policy to extend liability protection beyond standard home insurance.

Conclusion

While it is not illegal to have two home insurance policies for the same property, it is rarely advisable due to higher costs, claim complications, and potential policy conflicts. Instead of doubling up on coverage, consider optimizing your current policy or supplementing it with specialized coverage where needed.

Get the Best Home Insurance Today

At Toby Hansen Agency, we check over 100 carriers to find the lowest price with the most comprehensive coverage for your home. No matter your situation, we can customize a policy to fit your needs—guaranteed best price! Fill out our free quote form below and secure the right coverage today.