What Happens If Two Insurance Policies Cover the Same Risk?
Insurance is designed to protect against financial losses from damage. It is not meant to be used as a way to gamble and make money off damage to your business or personal assets. If you own multiple policies that cover the exact same risk, the payout result depends on the type of insurance coverage.
When you buy insurance, you are given a policy that explains the terms of your agreement. Your policy states what your insurance company will do if you own another policy for the same risk. Some policies pay on a pro-rata sharing basis, meaning they divide the payments with the other companies. Other policies designate themselves as primary or excess policies. Primary policies always pay claims first, whereas excess policies wait until the other contract has paid before making payments. Some contracts offer no coverage at all in the event you own a duplicate policy, making your extra coverage worthless.
Text taken from: smallbusiness.chron.com