overlapping insurance

How to Avoid Overlapping Insurance

September 27, 2021 - Benjamin Manz

Many people in Switzerland are either overinsured or have overlapping insurance which covers the same hazards. This moneyland.ch guide explains how to avoid paying unnecessary insurance premiums.

Just about every possible hazard can be insured against in this day and age – even a hole-in-one at golf or damage to a hairstyle. Many available insurance types are unnecessary or completely useless for most people.

But even useful insurance coverages must be streamlined in order to avoid your spending more than necessary on insurance premiums.

Firstly, there are major differences in premiums charged by different issuers. You can easily find the most affordable coverage using the unbiased insurance comparisons. This makes it easy to avoid paying more than necessary for any given insurance policy. Many residents of Switzerland spend far more than necessary on insurance simply because they do not compare offers.

Secondly, insurance agents and brokers often try to sell you long-term insurance contracts because they earn higher commissions on sales of long-term contracts. Make sure to stick with one-year insurance policies which you can terminate within a short time frame if you find a better deal or no longer need the coverage.

Thirdly, many residents of Switzerland are either heavily overinsured, or pay premiums for multiple policies which insure against the exact same hazards. Overinsurance occurs when the maximum sum insured by an insurance policy is much higher than the value of insured property or the maximum possible cost of covered hazards.

Example: If you are paying for 100,000 Swiss francs of personal property insurance but only own property with an insured value of 20,000 francs, then you are overinsured because you can only ever claim one-fifth of the benefit you are paying for.

The term overinsured is also used more broadly to describe the state of having unnecessary or overlapping insurance coverage. Taking out insurance policies which do not match your actual needs is another form of overinsurance.

Example: If you are satisfied with the service you receive from doctors at Swiss hospitals and have no qualms about being treated in general wards, then paying for expensive semi-private ward or private ward insurance is unnecessary.

Overlapping coverage occurs when two different insurance policies cover the same hazard. Almost all insurance policies include terms and conditions which prevent you from claiming insurance for the same loss from two insurance policies. If you pay premiums for two or more policies which cover the same hazards, you will normally still only get one benefit.

Here, moneyland.ch lists some of the most common causes of overinsurance and overlapping coverage and provides tips on how to avoid wasting money on unnecessary premiums.

1. More coverage than necessary

If you are paying for 100,000 Swiss francs of coverage when losses resulting from the covered hazards could not possibly amount to that much, then you are overinsured and are likely paying higher premiums than necessary. Overinsurance is especially common in household insurance. It is important to correctly calculate the actual value of your personal property so that you do not pay for coverage which significantly exceeds what your possessions are worth.

2. Overlapping accident insurance

Many compulsory health insurance policyholders continue to pay for accident insurance from their health insurance provider even though they are already insured against accidents through their employer. If you are employed for at least 8 hours per week, you should already be covered by compulsory accident insurance through your employer. If you are insured through your employer, you can place the accident coverage provided by your compulsory health insurance policy on hold and your health insurance premiums will be reduced accordingly. Occupational accident insurance has the added benefit of having no deductible, unlike the accident insurance provided by health insurance companies.

3. Overlapping roadside assistance coverage

Coverage for roadside assistance is included as a benefit with some car insurance policies and is also provided by motor clubs like the ACS and TCS. Additionally, this coverage also comes with many travel insurance policies or can be added to travel insurance policies as a rider.  Make sure that you are not paying for overlapping roadside assistance coverage.

4. Insuring passengers twice

Car passenger insurance covers bodily injuries to the driver and passengers when no third-party can be held liable (when the vehicle is at fault in an accident, for example). This insurance covers death, invalidity, loss of income and healthcare costs. But it is important to understand that residents of Switzerland are already insured against accidents by either the occupational accident insurance which they receive through their employer or the accident coverage which they receive through their compulsory health insurance (if they are not employed). Because residents are already insured by compulsory accident insurance, taking out car passenger insurance is only necessary if you earn an income but do not have occupational accident insurance (as a self-employed person, for example) and want loss-of-income insurance, as that is not provided by the accident coverage which comes with compulsory health insurance. It can also be worth taking out if you frequently drive non-residents who are not adequately covered by some form of accident.

5. Semi-comprehensive vs. fully comprehensive car insurance

Fully-comprehensive car insurance is normally only worth getting for new vehicles. The rule of thumb: Only cars that are five years old or less are worth insuring with fully-comprehensive car insurance. The reason for this is that the insurance benefit is slashed every year from the date of purchase to account for losses in the car’s value. The older your car is when damages occur, the smaller the benefit you receive will be. The insurance premiums which you must pay, on the other hand, remain just as high for as long as you keep the fully-comprehensive coverage.

6. Travel insurance overloads

Because travel insurance may include a broad range of coverages (health insurance, legal insurance, trip cancellation/interruption, life insurance, disability insurance) the chances of life insurance policies overlapping with other insurance policies is exceptionally high.

Many travelers accept the travel insurance pawned off on them by airlines and travel portals event though they are already insured by an annual travel insurance policy. If you already have a travel insurance policy, getting additional temporary travel insurance is completely unnecessary. Important: Some travel service providers (particularly online travel portals) will include travel insurance in the final ticket price by default, leaving you to disable the optional insurance yourself.

Depending on the travel insurance policy you get, travel legal protection may be included or available as an add-on. If you already have legal expenses insurance, getting additional legal insurance may not be necessary because many legal expenses insurance policies cover you Europe-wide and some even provide worldwide coverage.

Travel health insurance is included as a benefit on some travel insurance policies or may be offered as a supplementary rider for an added premium. This health insurance is not necessary if you already receive travel health insurance through your supplementary outpatient health insurance policy.

7. Credit card travel insurance benefits

Many credit cards provide complimentary travel insurance as a benefit. The coverage you receive from credit card benefits may overlap with coverages provided by travel, health, household and legal expenses insurance.

Most credit card insurance benefits only apply when you use the card to pay for at least part of the cost of a trip, but this is not always the case.

As a general rule, the travel insurance coverage you get with credit cards is less comprehensive than the coverage you get with individual travel insurance policies. For example, many credit cards include travel accident insurance covering death or invalidity, and coverage for rescue and repatriation. But the rescue or repatriation benefits you get with credit cards are typically limited to 60,000 francs. Although that is a higher sum insured than what you get with many travel insurance policies, it may not be enough to cover the full cost of an expensive rescue operation. You can get better search and rescue coverage with certain supplementary outpatient health insurance policies.

Some credit cards come with trip cancellation and interruption insurance, but benefits may be as low as a measly 500 francs or as high as 40,000 francs, depending on the card used. If you get sufficient travel insurance coverage by using your credit card to pay for a trip, then taking out extra travel insurance may not be necessary.

8. Insuring your luggage several times over

Luggage can be insured in many ways. For example, you can insure your luggage via household insurance and travel insurance policies. Many people do not know that some credit cards (particularly gold and platinum cards) provide baggage insurance as a benefit when you use them to pay for trips.

Here to, additional luggage insurance coverage may not be necessary if your luggage is already covered against theft by your household insurance (if it includes coverage for simple theft away from home) or by a credit card benefit. On the other hand, if your existing policies do not provide sufficient coverage or do not cover all hazards (damage or loss, for example) then getting a separate luggage insurance policy can make sense.

More on this topic:
Insurance policies: necessary, useful or a waste of money?
Simple theft away from home: Getting insured
Credit card insurance benefits in Switzerland
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Expert Benjamin Manz
Benjamin Manz is CEO of moneyland.ch and an independent expert on banking and finance.
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