The correct answer is: Double Insurance.
Double insurance is when an insured party takes out two or more insurance policies on the same property for more than its actual value. This can happen accidentally, such as when a person forgets to cancel an old policy when they take out a new one, or it can be done intentionally in an attempt to defraud the insurance companies.
Double insurance can be a problem for both the insured party and the insurance companies. For the insured party, it can mean that they will not be able to collect the full amount of the claim if the property is damaged or destroyed. This is because the insurance companies will only pay out up to the actual value of the property, even if the insured party has taken out multiple policies.
For the insurance companies, double insurance can mean that they are paying out more than they should be. This is because they are essentially insuring the same property twice. If the property is damaged or destroyed, the insurance companies will have to pay out the full amount of the claim to both insurance policies.
To avoid double insurance, it is important to make sure that you only have one insurance policy on each property. If you have taken out multiple policies, you should contact your insurance companies and cancel the excess policies.
Here are brief explanations of each option:
- Premium is the amount of money that an insured party pays to an insurance company in exchange for coverage.
- Reinsurance is when an insurance company purchases insurance from another insurance company to protect itself against large losses.
- Co-insurance is a type of insurance arrangement in which the insured party and the insurance company share the cost of a loss.