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Can I have two different car insurance companies?

The lowdown...
  • You are required by state law to carry car insurance on all registered vehicles that you own
  • You can only carry auto insurance in your name on a vehicle that you have an insurable interest in
  • If you have two vehicles, you can get insurance on each of the vehicles with different companies if you want
  • You should not buy two insurance policies on the same vehicle. If you do, you can only file a claim against one
  • Insurance companies can cancel your coverage if you have multiple policies because of the unjust enrichment rule

When you’re building an insurance portfolio, it’s important to buy protection that gives you peace of mind. Your portfolio can include all types of coverage to protect you against financial loss in various situations.

From medical insurance and disability coverage to auto and home protection, there are several products that make up a complete portfolio.

You can buy multiple insurance policies to pay for lost income after disability, emergency medical expenses, or death benefits.

Having multiple policies can help you fill in some of the common gaps that exist. Auto insurance doesn’t work the same way as life or disability policies.

Use our free comparison tool above to begin shopping for the best rates in auto insurance.

Before you decide to buy two different car insurance policies to fill the gaps you might be worried about, here’s what you need to know:

What is the purpose of personal car insurance?

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Auto insurance is a legally binding contract that indemnifies the policyholder. In this indemnity contract, the insurer agrees to pay for your losses that are thoroughly defined in the policy as long as you pay your premiums.

The insurer will also defend you when a claim is filed against you.

Your insurer will compensate you for damage or loss that occurs because of the actions of someone else when you carry the right coverage. If you have an at-fault loss, your insurer has a duty to make good for liability incurred by you or a covered driver.

The policy may pay for third-party damages or for medical bills.

Who can insure a private passenger vehicle?

Not just anyone is allowed to insure a car. All insurance companies have some basic guidelines that much be met before someone can buy insurance through the carrier.

One question that all agents will ask is who owns the car and who the car is registered to. The answer must satisfy the insurable interest requirement.

All carriers require the named insured on the policy to possess an insurable interest in the car. By industry definition, an insurable interest exists when the party or entity insuring the property will be subject to financial loss when an event involving the property occurs.

If the person won’t suffer any financial loss, they can’t purchase insurance on the property in their name.

If you own two different vehicles, you’re free to insure both of the cars with the same carrier or with separate carriers. When you own a luxury car or a classic vehicle, it might make sense to carry multiple policies to find the best premiums.

While it’s possible to do this, it usually makes the best financial sense to insure all of your vehicles in your household with the same company.

Can you have two policies on the same car?

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If you co-own your vehicle with a friend or a family member, you might be interested in carrying two separate policies on the same car. As tempting as this might sound, it’s not in your best interest.

In fact, most insurance companies will initiate the cancellation of your policy if they find out that you or the other owner have another policy in place.

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Why don’t insurers let you carry two different policies on the same car?

It might sound a bit odd that an insurance company would frown upon you having a separate policy that you can claim against. At first glance, it appears like your company’s liability would lessen when you have more coverage.

Unfortunately, that’s not how your insurance works.

The primary reason that companies consider double-insurance a violation of the terms of your contract is because of an industry term called unjust enrichment. Unjust enrichment exists when a policyholder unfairly collects on two policies for a single loss.

Since your coverage is only meant to help you recover after a loss, insurance companies want to prevent you collecting twice the settlement from two insurers.

What happens if you file a claim against two of your insurance policies?

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If there are two policies on the same car and the insurer doesn’t catch it, filing a claim will be very complicated. Both insurers won’t pay out for the loss. If they do, you could be breaking the law and guilty of fraud.

If you’re caught file a claim against two policies for the same loss, you may be subject to financial penalties or criminal charges.

There are some scenarios where having double insurance could be a legitimate oversight or mistake. If this happens to you, you should only file your claim against one of your policies.

When each insurer knows about each other, they will fight to try and make the other company pay.

In this scenario, the policy that was taken out first will usually be the primary policy. If you exhaust these benefits, you may be able to file a claim against the second one. Each carrier will have a reason to deny the claim, but if this happens by mistake the carriers may not go this far.

Cancel Your Old Policies When You Purchase a New One

You can cancel your auto insurance whenever you’d like. If you have auto insurance with a carrier that you’re not happy with or you’re paying high rates, you should look around for a better policy.

When you find a new policy and you bind coverage by making your first payment, be sure to cancel your old policy right away.

Not everyone likes to do business by phone or in person. If you value your time and still want to find the best car insurance rates, the best way to compare instant quotes is to use our online rate comparison tool.

You will need to enter your personal and vehicle information to start the quote process. After you take a look at your options, activate new coverage and cancel the old policy.

References:
  1. http://www.360financialliteracy.org/Topics/Insurance/Cars-and-Auto-Insurance/State-by-State-Minimum-Coverage-Requirements
  2. https://www.irmi.com/articles/expert-commentary/insurable-interests-and-interests-insured-in-property-insurance
  3. https://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/393747/59TN-3NJ1-F18B-74CT-00000-00/Restitution%20and%20unjust%20enrichment%E2%80%94overview
  4. http://www.iii.org/article/what-auto-insurance
  5. https://www.thebalance.com/indemnity-agreement-398294
  6. http://thismatter.com/money/insurance/insurable-interest.htm
  7. http://www.investopedia.com/terms/i/insurable-interest.asp
  8. http://classroom.synonym.com/can-car-two-separate-insurance-policies-two-different-people-10640.html
  9. http://www.pbs.org/newshour/rundown/why-insurers-cancel-policies-and-what-you-can-do-when-it-happens/
  10. http://finance.zacks.com/can-car-two-separate-insurance-policies-two-different-people-10938.html
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