13. I have taken out several insurance policies covering the same risk (e.g. hospital confinement or household damage). Can I claim for the sum insured under ALL policies or just the actual expenses/losses only? Is the claim for the death benefit under life insurance subject to different rules?
An insured person is not prevented by the law from purchasing any number of insurance policies covering the same item/person for the same risk.
However, there is normally an "other insurance" clause in the insurance policy that requires disclosure by the insured person of all the other insurance taken out. The "other insurance" must cover the same risk, the insurance coverage is additional, and the relevant policies are valid and subsisting.
Typically, the clause may set out the liability of the insurance company where the insured person has also purchased "other insurance", which could be categorised as follows :
- The "escape" provision whereby the insurance company will have no liability on the insured item/person in which the insured person has purchased other insurance;
- The "excess" provision whereby the insurance company will be liable for the amount of the excess insurance over and above the "other insurance" only; and,
- The "pro-rata" provision whereby the insurance company's liability will be limited to a proportion of the loss.
The above is the position as regards medical, personal injury and property insurance .
The provisions above intend to prevent the insured person from unfair enrichment under the Common Law. In other words, the total amount of the claims payable under the "primary insurance" (the subject policy) together with the "other insurance" (the other policies) should not exceed the fair value of the repair or replacement of the insured item (i.e. the total loss or all the expenses incurred).
Accordingly, you may claim under all of the policies. Depending on the terms of all your policies, your claims may be adjusted according to the express provisions under the "other insurance" clause in the way that the total payment will not exceed fair compensation for your loss. Example: You have taken out two medical insurance policies in which the sum insured for medical expenses is $10,000 for each policy (aggregate sum insured is $20,000). If your medical bill is $15,000, you can only obtain $10,000 from one of the policies and get $5,000 from the other one.
The position as regards life insurance policy is different. Here, if there is nothing untoward (e.g. fraud or misrepresentation), the insurance company will be liable to pay in full regardless of there being other policies under which claims could also be made.