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Double Insurance vs. Reinsurance: What's the Difference?

Edited by Janet White || By Harlon Moss || Updated on October 13, 2023
Double insurance involves a person taking out two insurance policies for the same subject and risk, while reinsurance is where an insurer transfers portions of risk portfolios to another party to reduce the likelihood of paying a large obligation.

Key Differences

Double insurance transpires when an individual or entity obtains two insurance policies for the same subject, assuring the same interests and risks. Contrarily, reinsurance is a practice where an insurance company transfers a portion of its risks to another insurer. While double insurance pertains to the policyholder securing excessive insurance cover, reinsurance focuses on an insurance provider seeking a way to manage its risk portfolio.
Both concepts, double insurance and reinsurance, operate on varied principles and impact different parties within the insurance framework. In double insurance, the policyholder pays premiums on two or more policies, potentially claiming from each in the event of loss. Reinsurance, however, doesn’t directly affect the original policyholder but rather changes the dynamics between insurance companies by spreading the risks among them.
Double insurance becomes pertinent when an insured party seeks to gain additional assurance or security by subscribing to multiple policies. However, reinsurance is not concerned with adding layers of security for policyholders but serves to safeguard insurance companies against colossal claims or accumulated losses by distributing risks. Here, the original insurer maintains its relationship with the policyholder, but reduces its risk by passing some of it to another insurer.
Despite their varied applications, double insurance and reinsurance are bound by regulations to prevent fraudulent claims or intentional malpractice. Double insurance often entails the contribution principle, where insurers share the compensation cost. Reinsurance, however, requires adherence to strict guidelines, ensuring that the reinsurer comprehends and agrees to absorb the specified risks from the ceding company and that the arrangement is adequately documented.

Comparison Chart


Insurance taken by a policyholder with two companies.
A practice where an insurer transfers a part of its risk to another insurer.


To provide additional security to the policyholder.
To reduce the liability of the original insurer.


The policyholder, in securing additional assurance.
The original insurer, in mitigating potential losses.

Premium Payment

Policyholder pays premiums on all taken policies.
The original insurer pays a premium to the reinsurer.

Claim Settlement

Contribution principle may be applied among insurers.
The reinsurer compensates the original insurer based on agreed-upon terms.

Double Insurance and Reinsurance Definitions

Double Insurance

Double insurance occurs when identical risks on an asset are insured with two policies.
John secured double insurance for his property with two different insurers to enhance his coverage.


Reinsurance is the practice where an insurer transfers some of its risks to another insurer.
To safeguard against substantial claims, Omega Insurance entered into a reinsurance agreement with Delta Insurance.

Double Insurance

Double insurance allows a policyholder to claim from any insurer in proportion to the extent of their respective liabilities.
After the fire, Lisa was able to claim the damages from both of her policies under double insurance.


Reinsurance can be treaty (covering multiple policies) or facultative (covering specific individual risks).
Skyline Insurance preferred facultative reinsurance to manage high-risk policies individually, ensuring targeted risk management.

Double Insurance

Double insurance doesn’t allow the policyholder to profit from the insured event.
Although Harry had double insurance, he could not receive compensation exceeding the actual loss incurred.


Reinsurance enables an insurance company to reduce its exposure to a particular risk by sharing it.
Following a catastrophic event, Stellar Insurance was grateful for its reinsurance policy, which mitigated its financial liability.

Double Insurance

Double insurance is not illegal but must be disclosed to the insurers involved.
Caroline made sure to inform both insurers about the existence of double insurance on her artwork.


Reinsurance does not alter the original contract between the insured party and the insurance company.
Despite their reinsurance policy, Horizon Insurers still dealt directly with policyholders and managed all claims processing.

Double Insurance

In double insurance, claims are often adjusted between insurers through the principle of contribution.
Upon loss, the two companies, due to double insurance, shared the settlement payout for David's claim.


Reinsurance involves a reinsurer accepting part of the risk of a policy issued by the original insurance company.
Pinnacle Insurance transferred 50% of its risk in a particular policy through a reinsurance agreement with Vertex Insurers.


To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company.


Insurance purchased by insurance companies that spreads the risk associated with selling insurance around so the danger of one large monetary loss is minimized.


What is double insurance?

Double insurance occurs when one insures the same risk with two insurance companies.

Is double insurance legal?

Yes, double insurance is legal but should be disclosed to all insurers involved.

Does reinsurance affect policyholders?

Typically, no. Policyholders deal directly with their original insurer despite any reinsurance arrangements.

Why do companies opt for double insurance?

Companies might choose double insurance for additional security and wider coverage.

How does reinsurance safeguard an insurance company?

Reinsurance disperses risk, helping insurance companies avoid devastating financial loss from high-value claims.

What is facultative reinsurance?

It covers specific risks or policies, often those that are exceptionally high-risk.

Can you claim from both policies in double insurance?

Yes, but total compensation can't exceed the loss, often adhering to the principle of contribution.

Who benefits directly from reinsurance?

The original insurer benefits by mitigating potential large losses.

Can an individual take double insurance on property?

Yes, an individual can take double insurance but must adhere to regulatory stipulations.

Can reinsurance be bought for any type of original insurance?

Generally, yes. Reinsurance can be utilized across various insurance types and policies.

What is reinsurance?

Reinsurance involves one insurance company transferring risk to another to minimize liability.

Can one policy be both double insured and reinsured?

Yes, a policy can be subject to double insurance and also be reinsured.

How does double insurance benefit the policyholder?

It provides additional coverage and assurance, though claims cannot exceed the actual loss.

What is the contribution principle in double insurance?

Insurers share the payout of a claim in proportion to the liability each has assumed.

Can a policyholder demand double insurance?

Policyholders can opt for it, but must adhere to the insurers’ terms and regulatory guidelines.

How does reinsurance stabilize the insurance market?

By spreading risks among multiple entities, reinsurance ensures that no single company bears excessive burden, maintaining market stability.

What happens in the event of a claim under reinsurance?

The original insurer handles the claim and is then partially compensated by the reinsurer as per their agreement.

Is reinsurance necessary for all insurance companies?

Not obligatory, but it's often utilized to manage and distribute risk efficiently.

Who pays the premium in a reinsurance agreement?

The original insurance company pays a premium to the reinsurer.

Why might an individual or entity avoid double insurance?

To prevent paying multiple premiums and navigating complex claim processes.
About Author
Written by
Harlon Moss
Harlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Janet White
Janet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.

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