Concurrency insurance is a situation in which two or more policies cover the same risk. This, in addition, during simultaneous periods.
Therefore, in the event of a claim, various indemnities will be recognized. Said payments could add a higher figure to the value of the protected asset, producing a situation of overinsurance that would unduly enrich the beneficiary.
Characteristics of insurance concurrence
The main characteristics of the insurance competition are:
- It can also be called multiple insurance.
- If the insured has not informed the insurer about the concurrence of insurance, the insurer is not obliged to pay any compensation.
- In the event of a claim, the insured will make the respective communication and each insurer will only pay proportionally. That is, assuming that the coverage of two different companies has been contracted, each one must pay, for example, 50% of the estimated damages. Thus, it is guaranteed that the sum of the payments does not exceed the insured capital, that is, the value of the protected asset.
- The foregoing is applicable, in general, to all types of policies that protect against damage. However, in life insurance, a value of the loss caused could not be estimated. Therefore, the beneficiary receives the full amount of all compensation.
- It should not be confused with coinsurance, where coverage of a certain risk is distributed through an agreement. Thus, it is established in advance what percentage of the expected compensation corresponds to each insurer. However, in the concurrence of insurance, there is no prior agreement.
Example of insurance concurrence
Suppose a family purchases three insurance for their home. The first, with the company BZY for an insured sum or maximum compensation limit of US $ 100,000.
Likewise, another policy has been contracted that could pay up to US $ 150,000 in the event of a claim. In this case, the insurer is the AIC company.
Finally, another coverage has been obtained for an insured sum of US $ 135,000, the provider being the company UC Securities.
To find out what each insurer should pay in the event of a claim, we first calculate the total value for which the home is protected.
100,000 + 150,000 + 135,000 = $ 385,000
Then, we estimate the percentage of the estimated damages that each firm will have to cover:
- BZY: 100,000 / 385,000 = 25.97%
- AIC: 150,000 / 385,000 = 38.96%
- UC Securities: 135,000 / 385,000 = 35.06%
Therefore, if a natural disaster occurs that causes damages of US $ 100,000 to the home, each company must pay the following:
- BZY: 25.97% x 100,000 = US $ 25,974.03
- AIC: 38.96% x 100,000 = US $ 38,961.04
- UC Securities: 35.06% x 100,000 = US $ 35,064.94