What’s a Contingency & Why Have it Insured?

Posted on by George Murphy

A contingency in the insurance world is an occurrence that can be planned for, but not predicted. The weatherman says it’ll be sunny tomorrow, but there’s always the contingency it might rain, so you plan ahead by throwing an umbrella in the car in the morning regardless. (Using an umbrella in the sun is classy anyway.)

Contingency insurance serves the purpose of supporting primary insurance, that’s where it gets its alias of “secondary insurance.” Most of the time contingency insurance is purchased through a separate company than primary insurance is covered with, but some companies offer this coverage as one that can be added on to the primary policy.

Difference Between Secondary & Supplemental

I thought the same thing, what about supplemental insurance?! Isn’t that the same thing as secondary? Sure sounds like it.


Secondary Insurance

-Separate Insurance

-Can Cover All Medical Bills, Leaving Only Deductible to Pay

Supplemental Insurance

-Supports Primary Coverage

-Pays Difference of Costs Primary Insurance Doesn’t Cover

What Does Secondary Insurance Cover? 

For Your Home

Contingency insurance can be used, but is not limited to, covering a home against tornadoes, flooding, earthquakes, and even theft. It all depends on the contingencies one wants to factor coverage for! This has to do with risk management. (Like property and situational risks.) The best approach to understanding the risks your home faces would be to team up with your insurance agent.

For Your Business

Secondary insurance can also be used as a form of back up business insurance. In the case of contracts, contingency insurance can prevent a business from having to pay in the event a contract is broken or is not followed accordingly.

Businesses tend to have many possible contingencies as they deal with many clients or consumers. This means that they must truly think out the web of business and contingencies involved.

For example, if a business relies on a supplier in order to complete and sell their product, contingency insurance should be purchased in case that supplier is put temporarily/permanently out of service. This includes international policies as well.

For Any Contingency Insurance

One key thing to remember with contingency insurance is that because it is separate from your primary insurance, you face the risk of doubling up. Meaning, if you’re not careful, you could end up paying for a contingency factored your primary insurance that’s also included in your secondary insurance!

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