What Does Non-Duplication of Benefits Mean?
Non-duplication of benefits is a ruling that prevents insureds from profiting by getting covered by two separate policies that insure the same risk.
The non-duplication of benefits only applies to receiving compensation for an already-compensated loss. It is still perfectly acceptable to have the same risk covered by two policies, so long as either only one policy compensates for the risk, or one policy covers the loss up to its limit and the second policy only compensates the remainder of the balance.
Insuranceopedia Explains Non-Duplication of Benefits
Insurance policies are meant to compensate for loss and it is not permissible, therefore, to use them to gain a profit. If the same loss is fully covered by two insurance policies and the insured receives double the amount they need for compensating the loss, they earn a profit. The doctrine of non-duplication of benefits intends to prevent this.
For example, suppose a person has a home insurance policy that will provide $1,000 coverage for damage to their custom violin, as well as a separate, stand-alone personal property insurance policy that will also cover it for $1,000. When the violin is damaged, the insured can file a claim against each policy. They will not, however, receive $2,000. Rather, one policy will be deemed primary, and it will pay the $1,000 claim.
If, on the other hand, the personal property policy covers up to $2,000 and the home insurance policy is deemed primary, then the home insurance will pay to the maximum ($1,000) and the property policy will the pay for the remainder (an addition $1,000). In this case, both policies pay, but neither will compensate for the loss beyond their individual limit.