LogFAQs > #907288563

What you're talking about works, depending on the type of insurance contract.

Life insurance for example pays out a sum of money on the event of your death. This money often goes to your estate to pay for funeral arrangements and settle your outstanding debts. Anything remaining in the estate gets distributed according to your last will or governmental laws for inheritance if no will is made. But you can also have insurance contracts written to name a beneficiary instead of your estate so that person receives the funds directly. Which could leave some of your debts unpaid if the beneficiary wasn't a party to the debt.

If you take out two or more life insurance policies, these policies will both pay out in full in the event of your death.

However, normal insurance contracts aren't written to pay you a specified amount in the case of an event occurring. They're normally written to make you whole again. In other words, they will pay the expenses you incur should the event they insure occur. Once you are made whole, a second insurance plan can't make you more than whole as you don't have any additional expenses. As the other poster said if you have a policy that will pay at most 80% of your expenses. Then the second policy will only be on the line for 20% of your expenses to make you whole again.

The reason for these forms of contracts is they keep expenses down for the insurance company, allowing them to offer lower premiums and compete with other insurance plans. If one insurance company didn't try to keep these costs down, they would have to charge more in premiums to cover the greater expenses. Another insurance company could come in and keep those costs down and charge less in premiums. Thus only policies that make you whole would survive as they offer the same coverage for less without the loop hole allowing for claimants to be paid more than their suffered expenses. Most people don't want to pay for two insurance plans for this possibility of double compensation, so the market flocks to the cheaper plans that don't allow for it.

And it makes sense to do things this way. Future medical bills or car repair bills are variable costs. It is difficult to predict what the amount will be. Life insurance policies are fixed payouts, declared before the event they insure happens. The insurance company can prepare to pay those claims as the amount is known.

There are plans that will pay you a set amount for hospital visits. I remember my insurance company offered some simple plan years ago that if I was hospitalized I would receive a payout directly. I didn't feel it was worth it so I didn't spend much time looking into the fine print of what triggers the payout. But if you get multiple insurance plans of this sort they will all payout just like multiple life insurance plans. Though at that point it may be easier and possibly less expensive to just ask the insurance company for a higher payout in exchange for greater premiums instead of buying an entirely separate plan.

So it's up to you, take a contract that pays you a fixed sum that might be less but might be more than your bills. Or take a policy that will make you whole again (or at least mostly whole again if there's an X% maximum) but will never payout more than your expenses. Or get both plans or get neither. Either way, there's nothing noncompetitive about it.


---

The only reason lightning never strikes in the same place twice, is that the same place isn't there the second time.