Can my auto insurance policies overlap?

Through simple human error, you may wind up having auto insurance coverage through two companies at the same time, or maybe you wanted to be doubly insured and decided to take out two insurance policies on your car to get the best coverage possible. 

Can you have your auto insurance overlap? Although it may be legal in some states, it’s never wise to have your car covered by two policies at the same time. You may think that with double insurance you get twice the protection, but the opposite is true. An insurance overlap can be as bad as having no insurance at all at the time of an auto accident.

Can auto insurance policies overlap?

People occasionally take out two insurance policies for their car simultaneously, but overlaps can also happen due to various other factors, such as having two car insurance policies for one person or managing coverage overlap between two insurance plans.

Buying a New Car

Some auto dealerships offer automatic insurance coverage as an incentive to buy a car. When that policy is about to lapse, the renewal rates might be too high, so you look for coverage elsewhere. When you find cheaper auto insurance, you apply and get temporary coverage while the underwriter reviews your application. This is known as binding a policy. As a result, you wind up having coverage on your car with two different insurance companies.

Once your bound insurance is activated upon payment of the premium, it’s crucial to notify your previous insurance provider that you’ve switched to a new company. Inform them of the start date of your new insurance to prevent inadvertently having two insurance policies covering the same risk and to avoid being accidentally insured twice during a move.

Getting Married

It’s common for two people getting married to have their cars covered by two different companies. If you go with one company, you’ll get a family discount and better rates. You may choose to do this before the policy lapses on one of the cars, causing an insurance overlap.

Contact your old insurance company and let them know you’re going with another company. See if you can get a prorated refund on the old policy if you cancel the auto insurance early.

Wanting Extended Coverage

You may find it tempting to overlap policies to make sure your car is well-insured. Not only is doing so illegal in some states, it never works and could lead to both companies refusing to pay if you’re involved in an accident. Instead, sit down with your insurance agent and talk about the types of coverage you need. 

Most insurance companies can add more coverage to your policy at a minimal cost. That way you get extended coverage without having to pay two different premiums.

Consequences of Having Double Coverage

Whether it’s deliberate or by oversight, having an insurance overlap can be a disaster if you’re in an accident and file a claim:

• Insurance companies will find out. The insurance company you file a claim with will find out you have another policy on the same car. The company you file with may insist you file with the other company. The other company may do the same thing.
• Insurance companies may argue. The two insurance companies may get into a legal battle over which company has to pay. You’ll be the one who loses.
• Insurance companies may accuse you. Both companies may accuse you of unjust enrichment, meaning you hope to profit by filing two claims. The purpose of insurance is to make you whole, not make you richer. You may face criminal charges as a result.
• Insurance companies may be slow to compensate. Even if it’s legal to have two insurance policies in your state, expect a long wait for compensation while the two companies argue over who pays what.

How To Avoid an Overlap

To prevent having overlapping coverage with your car insurance, it’s essential to monitor when your current policy ends. Take proactive steps to cancel it on the day your new policy starts. This approach also applies to managing health insurance overlap during job changes or having two health insurance policies. Additionally, ensure clarity when adding a restricted driver to your insurance policy.

Talk to Both Insurance Companies

If you’re unhappy with your current policy, shop online until you find an insurance company with better rates. Then talk to an agent at the new insurance company. Be honest about your driving history along with any at-risk drivers in your family. That way there won’t be any delays in activating your new policy.

Also, talk to your agent who is with your old insurance company. Let the agent know the activation date of your new policy and say you want your old policy canceled on that date.

Draft a Cancellation Request

Once you get your new policy, write a cancelation request asking that your policy be canceled on that same day that your new policy was activated. Submit your request to your old insurance company.

Deal With a Lapse In Coverage by Backdating

Sometimes a delay on the part of your new insurance company may cause you to be without coverage for a few days. This can be a problem in a state where it’s against the law to be without insurance coverage. In that case, ask your new insurance company to backdate your policy. Depending on the state in which you live, you can have a policy backdated for up to 60 days. You’ll need to provide a letter stating you had no known loss during that time.

Don’t Allow Double Coverage To Happen

Having two active insurance policies on your car simultaneously, whether due to seeking additional coverage or an oversight, is strongly discouraged. This practice, often referred to as overlapping insurance policies, can lead to complications. Insurance providers may view it as double-dipping, potentially resulting in them denying your claim in the event of an accident. It’s crucial to take proactive steps to cancel any redundant policies promptly. This applies particularly when considering the differences between one-way vs. two-way insurance or when insuring a car with two policies.