Written byHow Car Insurance Helps to Protect Your Car insurance is a crucial safety net that protects you financially against accidents, theft, and damages that could occur to your car. However, have you ever asked yourself if you can (or should) have two car insurance policies on one car? This can seem redundant, but some owners have reasons for purchasing double protection, whether due to legal obligation or peace of mind.
More than one person driving the same car has two car insurance policies. For example, if a parent and child drive the same car, it might be in their best interests to have the policy that applies to them when driving. In addition, many businesses get separate commercial policies on vehicles, which are also covered under a personal policy. Some car owners even buy a second policy, often for liability and comprehensive coverage, to guarantee a solution for any situation.
But dual coverage generates several big questions. Is it legal to have two car insurance policies on one car? Is It Worth Buying Double Coverage, or Is There Just Extra Spending? But more importantly, if you have two policies, will that mean larger payouts when you get into an accident, or could that create a more complicated claims process?
Before deciding whether to add a second car insurance policy, you need to understand its pros, cons, and legalities. This article will examine whether having dual coverage is worth the money or an unnecessary expense with little value. So here are the facts: Are two car insurance policies worth it—or just double payment for the same coverage?
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Can You Legally Have Two Car Insurance Policies?
Yes, carrying two car insurance policies on one vehicle is legal, but it usually isn’t necessary and may cause issues down the line. No federal law prevents dual coverage, but state restrictions and insurers’ practices rarely welcome simultaneous plans due to the potential for fraud.
Certain states may not allow you to hold two insurance policies, whereas others grant some flexibility (e.g., co-owners on a given vehicle can have distinct policies). Nevertheless, the more significant part of insurance agencies includes arrangements prohibiting covering one vehicle with more than one policy with the same transporter. If insurers cannot cross-reference the date of when the two policies are taken out, they might cancel one of them later or void one policy entirely.
When a claim is made under two policies, insurance companies utilize “coordination of benefits” to decide which policy is primary and which is secondary. The primary insurer pays out to the coverage limit, and the secondary policy may pick up the remaining costs. OK, but then trying to collect the same loss twice through both policies — “double recovery” — is insurance fraud, exposing you to specific legal penalties.
Carry gap insurance or an umbrella policy, or use higher limits to avoid having two policies. Reconfirm state laws and work with insurers to prevent unnecessary expenses and complications.
Why Would Someone Have Two Car Insurance Policies?
Owning two car insurance policies on one car seems superfluous, but there are good reasons someone would do this. Duplicate coverage should be avoided in general, but there are some instances when it may be necessary to write more than one policy.
Multiple Owners or Drivers
If two people own a vehicle but want to have separate policies, they may each get their own coverage. This is often the case when the owners want varying types of coverage, such as different deductibles and/or cap coverage limits or even different insurers.
Separate Coverage Types
Others choose separate policies for separate coverages. In other words, one only covers liability insurance, while the other provides comprehensive and collision coverage. This might happen when an insurer undercuts for one kind of insurance but not the other.
Business vs. Personal Use
If a car is used for business and personal purposes, the owner could require two contracts, one for work and the other for outside business use. Sometimes, you must have a commercial policy for driving on the job, which covers things a regular personal policy doesn’t.
High-Risk Driver Coverage
A household whose insured has a high-risk driver (such as a new teenager) or other circumstances (such as accidents or citations) may need to maintain a separate policy. Since some insurers will not write high-risk drivers on a standard policy or charge exorbitant premiums, separate coverage can be the better deal.
Two policies are significant as long as no overlap may void coverage (insurance regulations must be followed). An insurance company isn’t going to pay out twice for one claim, so it’s essential to speak with an insurance expert before buying additional policies.
Pros of Having Two Car Insurance Policies
Needless to say, the benefits of two-car policies could be enormous, allowing you financial cushions and dedicated coverage when you need it most. Here are some key benefits:
1. Extra Coverage for Added Protection
The benefit of having two policies is better financial protection. In an accident with high medical costs or high costs to repair damages, a second policy can help manage the expenses over the first, meaning a lower risk of paying out of pocket.
2. Customizable Policies for Specific Needs
You could get tailored each with different requirements with multiple policies. For instance, you could choose a full-coverage policy for a new vehicle and a liability-only one for an older car. This method guarantees you access to the best insurance without overspending.
3. Separation of Business and Personal Use
Separate policies keep your claims more unique if you use one vehicle for work and the other for personal use. Business policies often include broader liability limits and certain coverages that an individual policy might not cover. This distinction avoids conflicts over claims and guarantees proper coverage for each event.
4. Preventing Coverage Gaps
No insurance policy comes without exceptions or restrictions. Even if you are fully covered, having two may address areas where you may not be otherwise. If, say, one of the insurers excludes rental car coverage, the second policy might cover the rental if your car is being repaired after an accident or theft, for example.
Though two car insurance policies are not always necessary, having them can offer enhanced coverage, tailor the protection to your needs, and separate the driving of the vehicle types. However, you will want to look at the policy conditions very thoroughly so you do not pay for one-of-a-kind insurance policies or an extra bulky policy.
Cons of Having Two Car Insurance Policies
While it might seem like two car insurance policies double the protection, it usually complicates matters, leading to unintentional costs.
1. Higher Costs
Perhaps the most immediate downside is the cost factor. However, two distinct premiums mean hefty costs on one end without double returns on the other. Instead of being fully insured, you could pay more for coverage with overlapping protections than the coverage you need.
2. Duplicate Coverage Issues
However, insurance companies typically do not allow “double dipping” by policyholders. They could deny or minimize payouts if you put in similar claims with both insurance providers for the very same problem. It could leave you in an unenviable bind if neither insurer wants to pay your claim in full.
3. Complicated Claims Process
If you end up needing to file claims under two different insurance policies, the process can be extremely time-consuming and take up a considerable amount of valuable time. That’s if you’re in an accident, where it could take ages, tons of paperwork, and trying to figure out which insurance policy covers such accidents. These additional steps can contribute to a clunky overall claims process.
4. Risk of Policy Cancellation
Filling out all existing policies is critical for most insurance companies. If they discover double coverage on your part that was not disclosed to them, they may void one or both insurance policies. Having a cancellation on your record might also make it more difficult to find cheap insurance in the future.
Having one solid plan with enough coverage can be much easier and more economical than keeping two plans going separately. If you have cause to believe you need more coverage, upgrade your policy or buy endorsements instead of doubling up on insurance. Work with your insurer to determine the best policies without incurring additional costs or taking on extra risks.
Duplicate coverage leaves you paying twice and can complicate claims. To avoid doing this, be sure to follow these key strategies:
How to Avoid Insurance Overlap Issues
1. Structure Policies Correctly
Check your coverage before buying a new policy to ensure you are not duplicating coverage. Look for duplicative benefits included in multiple policies, like rental car reimbursement or roadside assistance. If you need more than one policy, like home and auto, bundle them with the same company to avoid duplicate coverage and save money.
2. Communicate with Insurers About Your Coverage
Just remember to tell your insurer about any existing policies. On the other hand, certain insurers may revise the coverage to avoid that overlap and still offer primary and secondary coverage. When changing providers, be sure there is no overlap or gap in coverage; both companies may charge you for a time. Get it in writing: In some cases where a customer buys another policy, the canceled one will be re-invoiced for the coming period (on a pro-rata basis), and the customer could end up being charged for two policies, so it is advisable to insist on written confirmation of cancellation.
3. Choose the Right Policy If You Need Two
Sometimes, you have to keep two policies—for example, if you have a second home or own separate business and personal auto policies. If so, ensure that one policy is set to primary and the other is secondary. This will help expedite claims settlement and avoid disputes between insurers regarding the liabilities for payment.
Carefully crafting the policy, keeping the insurers informed, diligently placing coverage with the right insureds, and avoiding insurance overlap will eliminate wasteful payments.
Conclusion
Two insurance policies are sometimes beneficial but also unnecessary. If the policies work in tandem — a basic auto policy supplemented with an umbrella policy — they can fortify financial exposure. For example, if you have two overlapping policies, you would likely pay more without reaping additional benefits because insurers generally do not allow double payouts.
However, two policies can be reassuring if you have high-value assets to protect or unique coverage needs. However, a single comprehensive plan may be cheaper for those who want only minimal coverage.
In the end, this comes down to your unique situation. Two policies can be a good idea if you want more liability protection or to fill potential coverage gaps. Nevertheless, it is vital to recap their policy terms and the high costs associated with their insurance to avoid expensive expenses in the future. Speaking with an insurance professional may help guide you on an ideal path.
