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Multiple policies

When more than one policy is in force on the same person at the time of medial need, then each insurer would need to bear a proportion of loss

Kairav Shah

04 Jan 2010

My friend Vilas Desai recently suffered a massive stroke at a young age of 42. This news came as a big shock to us as we all knew about his passion for following a healthy lifestyle. In no time, he was shifted to the nursing home of leading cardiac surgeon where timely medical care was given to given.

Till he was operated and subsequently shifted to ICU, I enquired with his wife Seema about his mediclaim policy (Health Insurance Reimbursement Policy). She informed me that Vilas is covered by three mediclaim policies from different insurers. Now I wanted to know the coverage amount from her. As expected she expressed here inability to share the amount as she had never checked with Vilas about the same.

A visibly disturbed Seema handed over all the three policies to me. On scrutinizing the same, I came to know that Company A had covered him for Rs. 5 lacs, Company B had covered him for Rs. 3 lacs and company C had covered him for Rs. 2 lacs thus he has a total cover of Rs. 10 lacs.

Next morning on my visit to the nursing home, I was delighted to know that Vilas's condition had stabilized. While coming out of the administrative office of the nursing home, Seema informed me that bill will amount to Rs. 2 lacs approx. and before I could say anything on this, she added that she can file the claim with Company B where cover was for the same amount.

Is it the right thing to do? No!

Then what should you do in case of multiple mediclaim policies?

Here Principle of contribution will come into play. So when more than one policy is in force on the same person at the time of medical need, then each insurer would need to bear a proportion of loss. This is referred to as Principle of Contribution and insurer should share the claim with all of them.

Contribution is the right of the insurer to call upon others similarly (but not necessarily equally) liable to the same insured to share the cost of an indemnity payment. If an insurer has paid the indemnity in full, he can recover an equitable proportion from other insurers of the risk.

There are few factors on which Principle of contribution is based:

  • Two or more policies of indemnity must exist

  • The policies must cover the same interest

  • The policies must cover a common peril which gives rise to the loss

  • The policies must cover a common subject matter

  • Each policy must be liable for loss

It is not necessary for the policies to be identical to each other. There should, however, be an overlap in such a manner that all the policies are liable for payment of indemnity.

Basis of Contribution

Contribution is usually calculated on the basis of Rateable Proportion. This means that each insurer contributes towards paying the loss in proportion to the sums insured on the policies.

> The amounts payable by each insurer are calculated as per the following formula:

Illustration: Vilas has Mediclaim with three different insurers for Rs. 5 Lacs, Rs. 3 Lacs and Rs. 2 Lacs and his treatment cost has amounted to Rs. 2,00,000.

The amounts payable by each insurer would be calculated as per the following formula:

Insurer Sum Insured      Amount Payable

Company A Rs. 5,00,000 (5,00,000 x 2,00,000)/10,00,000 = Rs. 1,00,000

Company B Rs. 3,00,000 (3,00,000 x 2,00,000)/10,00,000 = Rs.    60,000

Company C Rs. 2,00,000 (2,00,000 x 2,00,000)/10,00,000 = Rs.    40,000


Total Rs. 10,00,000                                                   Rs. 2,00,000


Acting on my explanation about the contribution of three policies of Vilas, his wife Seema informed all the three participating insurers and got his claim settled judiciously.

Ideally you should share the information about the possession of Mediclaim policies

while buying another Mediclaim from a different Insurance company. This will enable you to apply the principal of contribution in case of any unforeseen health related incident.