An insurance company generally undertakes the risks according to its capacity. Sometimes a company undertakes more risks than its capacity. It tires to share the risk with some company in case of its occurrence.
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Re-Insurance
When the insurance company insures the risk with some other insurance company, it is called Re-insurance. The re-insurance may be for the full amount of the policy or for a part of it. In case of loss the first company will get compensation from the second company. The insured will be concerned only with the company from which it purchased insurance policy. Re-insurances is between insurance companies only.
Double Insurance
Double insurance means purchasing more than one policy for the same subject. A person may get two or more policies on his life. He can claim the amount of all these policies. The implications of double insurance are different in fire and marine insurance. When a person purchases two ore more policies for his property, he cannot claim the same amount as that of loss from different companies. He will be able to claim only total loss from one or more companies. The loss will be contributed by the insurance companies in proportion to the policies issued by them.