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A Third Policy
The word "tertiary" literally means "third," so a tertiary insurance policy provides coverage beyond an insured party's primary and secondary policies. The tertiary insurance company works with the other two insurers on "coordination of benefits," an agreement on which company will pay which part of a claim.
Covering Excess Costs
Tertiary insurance acts as a backup in case primary and secondary coverage don't fully cover a claim. In the case of health insurance, for example, you may need a particularly expensive procedure that exceeds the cost what the other insurers are willing to pay. With liability insurance, you might get sued for an amount greater than the limits on your primary and secondary policies. Having tertiary insurance reduces the costs you'd have to pay out of your own pocket.
When Coverage Kicks In
A tertiary insurance policy kicks in only when the primary and secondary policies are inadequate. If you have a claim for, say, $100,000, and your first two policies offer a combined $150,000 in coverage, the tertiary insurer won't have a role in the claim at all. It's not as if the companies agree to "split the bill three ways." The primary insurer
is always billed first. If there's a balance left over after the primary insurer pays, then that balance goes to the secondary insurer. Any balance left over after that will go to the tertiary insurer.
Why It's Useful
Some may see tertiary insurance as unnecessary, since primary and secondary policies usually provide more than enough coverage. But not all incidents are covered. There are always exclusions or low coverage amounts, and the first two insurers might not be sufficient enough to pay for your claim. Tertiary insurance could come to an insured person’s aid in that situation.
Getting Tertiary Insurance
Since a tertiary policy doesn't kick in until benefits from primary and secondary coverage have been exhausted, premiums for tertiary insurance can be fairly low. Tertiary insurance may also be offered by an employer as part of a compensation package. Government benefits such as Medicare and veterans' health care coverage may be relegated to secondary or tertiary status for people who are eligible for them but are also getting coverage through an employer. Other forms of tertiary insurance may be offered by a credit card issuer, bank or other company that adds an insurance protection plan as part of its customer benefits package.