Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • Can you claim from two insurance policies? You can buy two insurance policies, but if the policies offer duplicate coverage you will not receive double payments in the event of filing a claim
  • If you have two policies that offer the exact coverage, insurance companies may reject your application because of unjust enrichment, when people unfairly receive extra money from multiple insurance payments
  • Certain situations such as a separation can sometimes be a wise time to buy two separate car insurance policies; however, most of the time buying two policies for the same vehicle is an unwise financial choice

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.

Look below at these specific situations 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

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Table of Contents

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:

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.

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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 CarNot 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 DriverIf 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 DiscountYou 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.
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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.

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Can I have two insurance policies on one car?

  • Auto insurance is a requirement in almost all states, but each vehicle registered to be driven on public roads is required to have only one policy
  • In order to insure a vehicle under your name, you need to have some sort of insurable interest in that vehicle
  • Unjust enrichment is a legal term to describe when an insured profits from a loss rather than just recouping their losses

In most states, auto insurance is a requirement. As long as you own a car and that car is registered in your name through a Department of Motor Vehicles, you’ll be required to purchase and maintain an auto insurance policy with basic coverage options.

While a single policy is a must, carrying more than one policy can actually violate the terms and conditions of a standard Personal Auto Policy.

Read on and find out why carrying two or more policies is often prohibited and reasons someone might have more than one policy.

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Why do car insurance companies prohibit two policies on one car?

It might sound as if an insurance company would have no real interest in how policyholders choose to cover their autos when they buy a secondary plan through an outside carrier.

At first glance, this decision seems harmless, but when you delve in and really understand the repercussions it’s easier to grasp why most Personal Auto Policies have special conditions written into them.

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What is the unjust enrichment provision?

The conditions are written into the policy to ensure that auto insurance is used how it’s intended and that policyholders don’t manipulate the product to use it for some type of financial gain.

This is why the unjust enrichment clause can be found in the auto policy form.

Unjust enrichment is a legal term that’s used to describe that an insured party has profited by filing claims on an insured loss instead of being restored to their pre-loss condition.

If there are multiple policies for a single car and there’s a claim, it’s much easier for there to be a double recovery issue, intentional or not. Since this is the main definition of unjust enrichment, having two policies on one car can be risky.

What are the elements of an unjust enrichment claim?

Just because you have double insurance doesn’t mean that you’re automatically trying to cheat the system. In order for a company to seek restitution for unjust enrichment, certain elements must be met.

Here’s some of the common elements that might signify fraud or deceptive intent:

  • The person must have benefited at the cost of the insurer
  • The person must be aware that they have benefited from the payment of the claim
  • The recipient or policyholder must have retained the benefit even with knowledge of the profits

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What can the insurance company do if you have two policies on one car?

So now that you know how the insurance companies view policyholders who carry multiple policies, you might be curious to learn what might happen if you still decide to pay multiple premiums for one automobile.

Under the best circumstances, the insurer will discover your have double insurance and they will set your policy up for cancellation.

When this happens, you’ll probably be asked to cancel all of your active policies on the car or your policy with the carrier will terminate.

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What happens if you have a claim with double insurance?

In more serious scenarios, where a loss has already occurred, it’s possible that the company could deny or appeal claims claiming that you were deceptive.

This could delay the claims process, prevent collection, or lead to retention claims for unjust enrichment after you’ve already collected a claims settlement as a remedy. This could cost you in time and in legal fees.

Which policy will pay if you have two in your own name?

What makes double insurance so complicated when it’s under the same name is that it’s difficult to decide which insurance company is responsible for paying a loss.

Insurance companies are a business and their mission is to pay out as little as possible while still fulfilling their obligations under the insurance contract.

The companies are each responsible for paying out the limits listed on the policy, but there must be an agreement as to which company will pay first.

This is why there’s a structure called a coordination of benefits to determine which company will make the initial payment.

Can a vehicle be insured by two different people?

You might understand the rules around insuring a car with two policies under your name, but what if the policy is purchased by another party?

While the same rules typically apply when insuring the same car, when the policies are under two different names the situation is not as easy to monitor.

It may be allowed in some states, but still, only one policyholder can collect for an insured loss.

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What is insurable interest and why does it matter?

Not just anyone can go out and buy insurance on a car. In order for someone to buy insurance on a vehicle in their name, they must have insurable interest in that car.

This means that the person must have the potential of suffering financial loss if something were to happen to the vehicle.

If there wouldn’t be a financial impact on the person, they shouldn’t buy a policy on the car.

Scenarios Where Double Insurance May be Acceptable

There are only a few scenarios where it’s wise to buy two policies on one car. If a married couple is going through a divorce, each party might insure their vehicles until the marriage is officially dissolved.

Some parents buy separate policies on a vehicle their child drives to avoid rate hikes for other household cars.

Just be sure to check with the insurer before assuming they allow the double insurance before you have a claim.

If you’re not happy with the premiums that you’re paying, it’s time to start price shopping.

Comparison tools are free brokerage-style programs that give consumers the power to find affordable rates by using the information provided to give you instant quotes.

Compare the rates with all of the best carriers and get insurance you can rely on.

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References:

  1. http://www.360financialliteracy.org/Topics/Insurance/Cars-and-Auto-Insurance/State-by-State-Minimum-Coverage-Requirements
  2. http://www.insurancenavy.com/blog/duplicate_auto_insurance_coverages_on_the_same_cars.aspx
  3. http://legal-dictionary.thefreedictionary.com/unjust+enrichment
  4. https://www.thebalance.com/car-insurance-divorce-rules-527482
  5. http://finance.zacks.com/can-car-two-separate-insurance-policies-two-different-people-10938.html
  6. http://www.petrolicious.com/your-guide-to-classic-car-insurance