Why might an insurer impose a limit on combined disability income benefits under multiple policies?

Imposing a limit on combined disability income benefits under multiple policies serves a crucial purpose in insurance management. Insurers aim to mitigate the risk associated with excessive claims from the insured, which can occur when individuals seek benefits from multiple policies simultaneously. Without such limits, there would be an incentive for policyholders to file multiple claims for the same disability, potentially leading to a payout that exceeds their actual income loss. This practice not only creates financial risk for the insurer but also contributes to higher costs and potential insurance fraud.

By capping the total benefits an insured can receive regardless of the number of policies, insurers can maintain a fair balance in claims experience, ensuring that benefits are distributed equitably while protecting the integrity of the insurance system. This practice helps insurers remain solvent and able to serve all policyholders effectively. It is a standard practice in the insurance industry to manage risk and discourage abuse of coverage.