Primary Insurance
Primary Insurance refers to the first layer of insurance coverage that is used in the event of a claim, where multiple insurance policies cover the same loss. This type of insurance takes precedence over any others, meaning it must first exhaust its limits or coverage responsibilities before secondary or tertiary insurers are called upon.
Key Points
Precedence: Primary insurance will be the first coverage applied in a claim situation, when more than one policy could potentially cover the claim.
Importance in Policy Layering: In layered insurance arrangements, clarifying which policy is primary can prevent delays and complications in the claim process.
Example Scenario:
- If a person holds an insurance policy on their own beside being included in a collective company policy installing the same risk (like workplace accidents), the personal insurance would typically operate as the primary insurance depending who has established what is outlined.
Related Regulations
National Association of Insurance Commissioners (NAIC) offers guidelines that help understand how insurance precedence should be settled NAIC website.
Various state laws and regulations also govern how insurances determine the primary and excess builder regarding claims precedence, further specificities are typically adjusted between contracts by the entities involve.
