Surprisingly often vehicle insurance policies may overlap but this is usually by mistake. People may not even realize that they have two policies running at the same time. If someone is deliberately buying two car insurance policies in the hope that they can claim twice for the same damage, they may be charged with fraud when they try their luck since you aren’t allowed to be compensated twice for the same loss. Having overlapping coverage is usually a waste of money.
There are several reasons why you may end up with overlapping automobile insurance policies and they are:
Thinking it is safer: Some people may know that their current policy is expiring. Rather than checking exactly when and making sure that new policy starts at the same time as the old policy ends, they may just start their new policy early thinking this is a safer option to make sure they aren’t out of coverage.
Auto-renewal: Again, people may buy a new car insurance policy to replace their expiring policy, not realizing their current policy is set to auto-renew. That is why it is important to communicate with your current insurer if you aren’t going to renew your policy to let them know in any case.
Notice periods: People may have received notices of cancellation due to non-payment or another reason. Without realizing they are still covered until the end of the notice period, people may go ahead and buy a replacement policy thereby having overlapping vehicle insurance.
Overlapping coverage: At times, people may not have entire policies with similar coverage overlapping but may have only certain coverage overlapping. For example, you may have roadside assistance in your auto insurance policy and have this coverage from a Roadside Recovery Service provider as well.
Is It Legal to Have Overlapping Car Insurance Policies?
In a large majority of states, it may be perfectly legal to have two policies for the same car. However, if someone tries to claim from two policies at the same time in an effort to get paid twice, they would be committing insurance fraud since it is illegal to knowingly receive two compensations for one damage. Insurance is based around the key principle of compensating people for their losses. In other words, a policyholder cannot be bettered by insurance and having two payments would cross the line between getting full compensation for your losses and achieving a better financial outcome after an insured loss.
Since, you aren’t allowed to make claims on both insurance policies you have on one car, you would be wasting money by having overlapping policies.
Issues with Having Overlapping Vehicle Insurance Policies?
Although this usually happens because of an oversight, there may be negative consequences of having two auto insurance policies covering the same car in case of a claim.
Contribution requirements: When there are two policies covering the same risk and there is a claim, both insurers may be required to contribute to the settlement. When the companies determine that the arrangement wasn’t made to defraud both companies, the policyholder may be allowed to make a claim on one company and the insurers may agree between themselves as to how much each party will contribute.
However, during the claims process, disputes between the insurance companies may arise over matters such as which repair shop to use, the extent of the damages, or in cases of total loss, determining the actual cash value of the vehicle. These disputes can lead to delays in resolving the claim.
Additionally, it’s important to note that with two insurance companies involved, the same incident may be reported as a claim twice. This is because both parties contribute to the losses. Consequently, this could lead to higher auto insurance premiums during renewal due to the increased number of claims on record.
Suspicion of fraud: If the companies suspect that this is fraudulent activity and the policyholder intended to make claims on both companies and get away with it, they may investigate the claim in detail and they may even decline a claim on the basis of insurance fraud. Unfortunately, some people may try this but they are unlikely to get away with it because insurance companies share information about the claims.
Avoiding Car Insurance Overlaps
As it is clear that having overlapping vehicle insurance policies are hardly ever beneficial but they may create problems, especially in case of claims, motorists should try to avoid such overlaps and don’t waste money on them. Here are some tips to avoid them:
- Always cancel the current policy when you arrange a replacement policy. Some people may think that the policy would be cancelled automatically when the insurance company doesn’t receive payment anymore but this isn’t the right way to go about it. Just contact your insurer, tell them you arranged a new policy and cancel the policy. You may even receive a refund.
- Check to see if your current car insurance is auto-renewing. This will normally be noted on a renewal notice. Otherwise, you can check with the company to see if this is the case and cancel auto renewal arrangements when you are switching your policy at renewal.
- Always check your bank and card statements to make sure there aren’t unusual payments. For example, you may think that you didn’t have auto-renewal but you had and your insurer renewed your policy and took premium payments from your account. If you realize this, contact your previous insurer and explain to them that you have another policy now and ask for them to cancel the policy. Typically, insurers may require proof of alternative coverage but they will cancel the policy from the inception date and offer full refund once they know you didn’t intend to buy the policy.
Can You Switch Car Insurance Simultaneously?
Typically, policies are switched seamlessly without any overlap or lapse at 12:01 am on the last day of your current coverage. Companies and agents do this every day. If you are instructing companies yourself, keep in mind that your new policy must start on the last day of your current policy term. Some motorists may think that they have one more day of coverage on the last day but they normally don’t. Once you set your new policy to start on the last day of your current policy term, at 12:01 am on that day your old policy expires and your new policy starts simultaneously.