What is the Difference Between Double Insurance and Reinsurance?

What Is Reinsurance?

What Is Double Insurance?

Differences Between Reinsurance And Double Insurance

Following are some major dissimilarities between the double insurance and reinsurance plan:


Double Insurance Plan

Reinsurance Plan

Consumers of the plan

Individual customers buy one or more double insurance plan(s) to secure the financial loss caused due to the damage of a single object.

Insurance companies buy a reinsurance policy to share their liabilities (risk) with the reinsurer.

Subject of the plan

The subject of a double insurance plan is a property or item.

The subject of a reinsurance policy is the primary insurer’s risk.

Beneficiaries of the plan

Insurance agencies settle the claimed coverage amount directly with their end customers.

End customers get the claimed amount from their insurance companies, not from the reinsurer. Reinsurers are liable to provide coverage only to their client insurance companies.

Settlement of coverage

All the insurance companies will share the total loss according to the proportion of the insured amount.

The reinsurer provides coverage to the primary insurance company according to the predetermined conditions of the policy.

Compliance of customers

Individuals need to clearly state the double insurance providing agency about the existing policy against the same object. After getting its consent, the double insurance policy will become valid.

Individuals do not need to contact the reinsurer. Instead, their insurance companies oversee the reinsurance agreement and its terms and conditions.


Let’s assume that the sum insured for the 1st and double insurance plans are respectively ₹ 4 Lakhs and ₹ 6 Lakhs, and the coverage amount is ₹ 12 Lakhs. In such a scenario, if the policyholder incurs a financial loss amounting ₹ 5 Lakhs, they will get coverage of ₹ 2 Lakhs and ₹ 3 Lakhs respectively, against the 1st and double insurance plans.

Let’s assume that an insurance company ABC sells fire insurance policies to a large-scale company. If ABC takes a reinsurance policy against that fire insurance plan, a certain percentage of total risk will get distributed with that reinsurer. For example, if the risk-sharing percentage is 25% and the claimed amount of a customer is ₹ 40 Crores, the primary insurer will get ₹ 10 Crores from the reinsurer.

Now that you know the differences between reinsurance and double insurance, you can clearly assess which one will benefit you in terms of securing you against financial loss. 

Whereas reinsurance allows an insurance company to reduce its risk factors, double insurance can help you fully cover the loss incurred due to the damage to your insured property. If the insured amount is lower than the resale value of your item, you can purchase a double insurance policy to ensure adequate coverage. 

FAQs About the Differences Between Reinsurance And Double Insurance

What are the types of reinsurance plans?


There are two types of reinsurance policies, as mentioned below:

  • Treaty Reinsurance Plan
  • Facultative Reinsurance Plan

What are the different clauses of a double insurance policy that you must be aware of before purchasing it?

Before buying a double insurance plan, you need to know about escape, notification, excess, and rateable clauses. By knowing these, you will know when your policy coverage may become void, how much you will be able to claim and other important aspects.

What is a notification clause of a double insurance plan?

The notification clause states that an individual needs to acknowledge their alternate insurer about the existence of a policy against the loss of an item before purchasing a double insurance plan. Otherwise, the new insurance company may cancel its policy, making the coverage ineffective.

Can a customer get more than the total loss owing to the active double insurance plan?

The cumulative compensation from all their insurance plans will not exceed the total loss they incur. Insurance companies will provide coverage in proportion to the insured sum.