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UPDATED: Oct 9, 2018
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Car insurance is a legal requirement based on the financial responsibility laws that are written in the state.
While liability coverage is almost always required, there are very few scenarios where carrying two separate policies from two different carriers is wise and necessary.
Click below to jump to a specific situation to see if duplicate coverage would be right for you:
- Buying a new car
- Buying a policy for a car belonging to someone else
- Separating from your partner
- Owning two cars
- Owning a luxury car
- Having a high-risk driver in your home
- Having a loyalty discount
Understanding Duplicate Coverage
When you buy two car insurance policies, you want to avoid paying for something that is referred to as duplicate coverage.
As the term would suggest, duplicate coverage in the car insurance marketplace is when vehicle owners have more than one policy on the same covered auto.
If you were to review your policy, you might find that the policy states that knowingly carrying two policies on a single car is unlawful.
Some insurers will actually reject applications for vehicles with a different policy because of a legal term called “unjust enrichment” which refers to people who unfairly profit because they receive multiple payments.
While some insurers find it unlawful, most will only go after their policyholders who have the intent to defraud the carrier.
Surprisingly, duplicate coverage actually happens more often than you might think.
There are scenarios where one vehicle that has its own unique VIN will have more than one insurance policy with varying levels of coverage. Here are some of the reasons why this double coverage might happen:
#1 – Obtaining a New Policy or Adding a Newly Acquired Car
Some dealers offer their clients the option to bind temporary auto insurance coverage so that they have coverage when they drive off of the lot.
If you have temporary coverage and you also have protection under the newly acquired auto clause of your existing policy, you may have duplicate cover with two separate companies.
When filing a claim, either the primary policy will pay or the damage repairs will be divided equally among each insurer.
#2 – Buying a New Policy When the Car Is Covered By Another Family Member
If a family member is insuring a vehicle that you both have an interest in and you buy your own insurance policy, the vehicle will have duplicate coverage until one policy is canceled.
If a claim is filed, each insurer will need to determine which policyholder has an insurable interest and which carrier should be the primary company to issue a payout.
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#3 – You Are Separating and Want to Protect Yourself
If you and your spouse are in the midst of a separation, it could be a good idea to buy separate policies on the same vehicle to ensure that the coverage remains active.
If there is a miscommunication and one party believes the other is insuring the vehicle that is registered in both spouses’ names, it could become a major issue that leads to lost assets and major fines.
If you get separate titles and you liquidate the assets properly, this issue may not be a problem if you give consent to be taken off of the other policy.
#4 – Buying Two Different Policies on Two Different Cars
There can be major confusion surrounding insurable interest and when it is appropriate to buy more than one policy on a single car, but it gets a bit more straightforward when it comes to owning two policies on two different covered vehicles.
There are absolutely no issues with unjust enrichment or unlawfully duplicating coverage when the vehicles on each policy have different VINs.
While you are free to do as you please if you are a registered owner of the vehicle, it might not be in your best interest to apply for a separate policy when there are so many advantages to carrying your coverage with the same carrier.
Three Additional Scenarios Where It Is Advisable to Have Two Policies
Knowing when to drop everything and search for a new policy is important if you are buying a new car or thinking about combining coverage. Here are three more scenarios where it is not a waste of time to bind a new policy:
|Reasons for Duplicate Coverage|
|You Have a Luxury or Classic Car||Not all insurance companies specialize in insuring all types of vehicles. Some companies may target the standard sedans and others might be great at insuring luxury models, exotic cars with a high value or classic collector cars that are hardly driven.|
Buying a standard personal auto insurance is not always appropriate. The insurer may not offer the special coverage options or terms that you need. Insure your everyday cars with one company and the others with a specialty company.
|You Want One Policy to Have a High-Risk Driver||If you own more than one car that a high-risk driver in your home will only be driving, you can buy two separate policies and list that high-risk driver on only one.|
You may be required to exclude the driver from your policy that contains the vehicles that they do not drive.
|You Want to Keep Your Loyalty Discount||You can sometimes receive a loyalty discount for staying with a company for an extended period of time.|
If you buy a new car and the insurer is not competitive, you can purchase coverage elsewhere but keep your vehicle with your current carrier for the savings in the future. Duplicate coverage for the sole reason of keeping a discount is probably not cost effective.
There are several advantages to combining insurance. If you are tired of the inconvenience of having multiple policies, it is time to price premiums for insurance on all of your cars with one carrier.