Secondary Coverage

What Does Secondary Coverage Mean?

Secondary coverage refers to insurance that covers a risk once the primary insurance covering the same risk has been exhausted or reached its limit. To activate secondary coverage, proof that the primary insurance has been used is required to pay the remaining excess.

An auto loan is one of the clearest places this plays out. If a car is totaled, the primary auto policy pays the depreciated value, and a separate policy like standalone GAP insurance pays what is still owed on the loan above that amount.

Insuranceopedia Explains Secondary Coverage

A person with two insurance policies of the same type does not receive payment twice for the same risk. Instead, the primary insurance pays first, and if there are remaining expenses, the secondary insurance can cover the excess. In some cases, the secondary coverage may not pay for the deductibles of the primary coverage. Additionally, the individual must provide proof to the secondary insurer that the primary coverage has been used first, often in the form of a receipt from the primary insurer.

This receipt requirement is also why pet insurance reimbursement works the way it does, since the policyholder typically pays the vet bill up front and then submits the paid invoice to the insurer.