What is the definition of primary insurance?

The definition of primary insurance refers to any type of coverage that is the first to respond to a loss, meaning it provides immediate benefits up to the limits of the policy before any other insurance coverage comes into play. This characteristic is crucial because it determines how claims are paid and in what order, especially when more than one insurance policy could potentially cover the same loss.

Primary insurance is essential in risk management, as it ensures that the insured does not have to wait for other policies to be exhausted before receiving benefits. For instance, if an insured individual has both a primary health insurance policy and a supplemental policy, the primary policy will process and pay for the medical expenses first, after which the supplemental policy may cover any remaining costs.

The other options relate to insurance concepts but do not accurately represent the definition of primary insurance. Options that describe coverage responding after other insurance or requiring multiple policies do not align with the primary role of insurance, which is to address losses as they occur. Furthermore, the concept of a policy lapsing without notice does not pertain to how insurance operates concerning loss coverage. Understanding the distinction of primary insurance is vital for effective insurance planning and coverage management.