Concurrent Insurance

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is Concurrent Insurance?

Concurrent insurance is when there are two or more insurance policies that provide coverage for the same risks over the same period of time. Concurrent insurance is most often used when an insured person or business purchases policies in addition to a primary policy, with the additional policies providing excess coverage.

Key Takeaways

• Concurrent insurance is when two insurance policies are held to cover the same risks over the same time period.
• Concurrent insurance usually includes a primary policy, with the second policy meant to act as excess coverage.
• Insureds taking out concurrent policies generally do so when they believe a single policy cannot adequately protect against a particular peril.
• There can be issues with determining which insurer should cover losses, however, which can lead to having the court decide who pays.
• Concurrent causation relates to property insurance, saying that a loss should be covered when two perils, one covered and one not covered, cause damage.

How Concurrent Insurance Works

Concurrent insurance policies might be a good idea for an individual or business that believes that a particular peril poses a significant risk that cannot be effectively covered by a single policy. Purchasing one or more concurrent policies may be a prudent course of action if the cost is not prohibitive.

Determining which insurance policy pays for a covered loss can be difficult. Insurers will seek to shift claim responsibility to the policies that they did not underwrite, and they may take the issue to court. The courts are then responsible for determining who pays—a process called apportionment. Insurers will examine their own policy language, as well as that of the other policies, in order to make a case that the other policy is more specific to the covered loss.

Special Considerations

Insurance policy contracts often include clauses outlining the framework that it uses for apportioning coverage when risk is also covered by other policies. The three primary categories of apportionment are pro rata, excess, and no-liability. For example, the policy may say that it will only provide coverage in excess of the coverage provided by other policies. If this same claim is used in each policy, the general rule is that the language cancels each other out, and each insurer will be responsible for a proportional amount of coverage, called pro rata.

Due to the complexity of policy language, courts may provide a ranking of the order of policies when it comes to which policy is required to offer coverage and by how much. This order is determined by the language of each of the insurance contracts but may also use other factors such as the amount of premiums paid.

In the complex area of concurrent insurance claims, there are a few principles that are worth keeping in mind:

• Be honest and conservative in your internal assessments of your potential exposure. It does little good to be overly optimistic in assessing your liability risks.
• If you deselect a particular primary insurer in a concurrent insurance situation, it's important to preserve your rights by keeping the deselected insurer informed and up to date about litigation developments.
• Avoid surprises. Subject to appropriate confidentiality protections, invite a deselected insurer to participate in settlement discussions or at least keep the deselected insurer apprised of settlement discussions.

Concurrent Insurance vs. Concurrent Causation

Concurrent insurance is two insurance policies held at the same time. Meanwhile, concurrent causation is related to property insurance. This type of legal doctrine says that when damage is caused by two or more causes, where one is covered and another excluded, then the loss should be covered. Specifically, a loss caused by two perils, such as wind and flood, should be covered since it's generally impossible to distinguish which peril caused which damage.