This article has been updated from a previous article.
Is there such a thing as having too much insurance coverage? After all, if an insurer is willing to cover you, whether it’s life, home or auto — why would you turn it down? As it turns out, many Canadians find themselves having coverage for the same benefits under multiple plans. This scenario is referred to as having dual coverage, or double insurance.
While having dual coverage can be advantageous, you also don’t want to pay twice for the same benefit. But before you rush to opt out, think about the benefits you actually do use. It’s important to know the risks of cancelling coverage, because it may be tougher than you think to get back.
In this article, we'll delve into the concept of double insurance, explore its benefits, and provide insights to help you make informed decisions about your coverage.
What is double insurance?
Double insurance occurs when individuals have multiple health insurance policies that provide similar benefits. One common area where that comes up is when multiple members of the same household are given extended health insurance through their employer — which usually covers not only the policyholder but also their spouses and dependents. If both you and your spouse have workplace coverage, it can result in the possibility of overlapping benefits from both plans, creating a scenario commonly referred to as double insurance or coverage.
What are the benefits of having double insurance?
Under the coordination of benefits in many group plans, your secondary insurer can cover expenses that your primary insurer doesn’t. This can come in handy, as benefits are often limited to a specific percentage and a maximum amount per year. Having two plans can potentially enable you to recoup 100 percent of your out-of-pocket costs — whereas solely depending on one plan may leave you with some expenses uncovered.
How does coordination of benefits work?
You can make good use of double insurance by coordinating your benefits. When a person has multiple insurance policies, one plan typically serves as the primary insurer, and the others become secondary or tertiary insurers. The primary insurer pays its portion of the claim first, and then the secondary insurer may cover any remaining eligible expenses up to the limits of the policy.
Let's say your plan covers 70 percent of certain vision care expenses, and your spouse's plan covers 50 percent — you can expect to get 70 percent of your costs reimbursed by your own insurer, and the remaining 30 percent through your spouse’s plan. You can’t get back more in reimbursement than you’ve actually spent, and both plans’ maximum dollar amounts still apply.
What about your children?
For dependent children, the specifics may vary depending on the plan, but your insurers should provide guidance. In most cases, children's expenses are applied first to the parent with the earlier birthday in the year.
One potential downside to double insurance is that most workplace plans require employees to contribute financially. If your secondary plan involves a monthly contribution, you may receive less in reimbursements than you pay in premiums. To figure out whether you're overpaying on your group benefits, take a close look at the services you use, and the amount you pay in premiums. Calculate whether the benefits outweigh the costs. For example, you may find that you pay $500 in premiums a year but only get $100 total reimbursement from the plan.
Your pay stubs and HR department can provide exact figures regarding your workplace contribution plans. Additionally, consider any tax credits you may receive for health plan contributions.
Should you opt-out of double insurance?
Deciding to opt out of one of your insurance plans should not be taken lightly. Even if the numbers suggest that a second plan isn't cost-effective, remember that opting out comes with some risks. Rejoining a plan that you've left may be challenging, and could involve waiting periods or certain requirements, such as a medical examination, before you regain coverage.
In situations involving serious illnesses or unexpected health expenses, having access to both insurance policies can prove beneficial. Therefore, carefully evaluate your situation and the potential risks before making a decision.
Review your extended health insurance options
To maximize the benefits of your insurance coverage, your first step should be reviewing the specifics of your insurance coverage. Familiarize yourself with the coordination of benefits provisions, contribution requirements, and the extent of coverage for various services. By doing so, you can make informed decisions that align with your financial goals and health needs.