Why is the coordination of benefits (COB) important in insurance?

Coordination of benefits (COB) is a critical process in insurance that ensures policyholders receive the maximum benefits available to them when they have multiple insurance policies covering the same risk. When more than one insurance policy applies to a claim, COB helps to determine the order of payment and how benefits are distributed between the insurers. This prevents situations where policyholders might receive more than the actual loss incurred, which is often referred to as "double-dipping."

By ensuring that policyholders receive all possible benefits, COB plays a key role in providing comprehensive coverage for individuals with multiple insurance plans, such as those who might have insurance through both a personal plan and an employer-sponsored plan. This coordination promotes fairness and efficiency in the use of insurance resources while also safeguarding the insured from potential losses that might occur if one policy's benefits were insufficient. Overall, the emphasis on maximizing benefits is essential in maintaining a fair and functional insurance system.