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⚠️ '''Over-insurance''' occurs when the total amount of [[Definition:Insurance coverage | insurance coverage]] on a risk exceeds the actual value of the [[Definition:Insured property | insured interest]], creating the potential for a [[Definition:Policyholder | policyholder]] to collect more than the true [[Definition:Actual cash value | economic loss]]. In [[Definition:Property insurance | property insurance]], this might mean insuring a building for $10 million when its replacement cost is only $7 million; in [[Definition:Health insurance | health]] or [[Definition:Liability insurance | liability]] contexts, overlapping policies from different carriers can produce a similar effect. Over-insurance runs contrary to the [[Definition:Indemnity | principle of indemnity]] — the bedrock rule that insurance should restore, not enrich.

🔍 Several mechanisms can lead to over-insurance. A policyholder may obtain duplicate coverage unknowingly, or property [[Definition:Sum insured | sums insured]] may not be updated after depreciation or market declines. In some cases, over-insurance is deliberate, motivated by the hope of profiting from a [[Definition:Loss event | loss]] — a form of [[Definition:Moral hazard | moral hazard]] that can escalate into [[Definition:Insurance fraud | fraud]]. [[Definition:Underwriter | Underwriters]] guard against it during the [[Definition:Risk assessment | risk assessment]] process by verifying valuations, requiring [[Definition:Appraisal | appraisals]], and reviewing [[Definition:Other insurance | other-insurance disclosures]] on the [[Definition:Insurance application | application]]. When over-insurance is discovered at claim time, [[Definition:Other insurance | other-insurance clauses]] and [[Definition:Contribution | contribution]] rules limit the payout to the actual loss.

💡 Beyond the moral-hazard dimension, over-insurance represents an inefficiency for policyholders who pay [[Definition:Insurance premium | premiums]] for coverage they can never fully collect on. Advisors, [[Definition:Insurance broker | brokers]], and [[Definition:Managing general agent (MGA) | MGAs]] add value by ensuring that [[Definition:Sum insured | sums insured]] and [[Definition:Policy limit | limits]] align with genuine exposures. From the insurer's perspective, detecting and preventing over-insurance improves [[Definition:Loss ratio | loss-ratio]] outcomes, reduces [[Definition:Claims handling | claims]] disputes, and strengthens the integrity of the [[Definition:Risk pool | risk pool]]. Regulators in many jurisdictions also empower insurers to void policies obtained through intentional over-insurance.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Indemnity]]
* [[Definition:Under-insurance]]
* [[Definition:Moral hazard]]
* [[Definition:Sum insured]]
* [[Definition:Other insurance]]
* [[Definition:Insurance fraud]]
{{Div col end}}

Definition:Over-insurance - Revision history

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