Auto Insurance: Stacking Coverage

It is possible to have overlapping auto insurance, but it is generally not recommended. While it is not illegal to have overlapping insurance policies, it can lead to complications and increased costs. In the event of a claim, both insurance providers will need to agree on how much each should contribute to the payout, which can cause delays. Additionally, making multiple claims for the same incident is considered insurance fraud and can result in losing coverage and facing criminal charges. Overlapping insurance policies also mean paying multiple premiums, which can be very expensive. Therefore, it is essential to carefully review policy terms and conditions to avoid overlapping coverage.

Overlapping insurance is not illegal but it is unwise

While it is not illegal to have overlapping auto insurance, it is unwise for several reasons. Firstly, it can be very costly as you will be paying two premiums for one pay-out. In the event of an accident, both insurance providers will need to agree on how much each should contribute to your pay-out, which can cause delays in processing your claim. If they disagree, you may be left without coverage even though you paid double the premiums.

Secondly, making claims to two different insurance companies for the same accident is considered unjust enrichment and is illegal. This action can lead to criminal charges and the loss of your good driver discount on both policies. Additionally, your premium costs from both insurers will likely rise after a claim.

Thirdly, overlapping insurance can also complicate the claims process. Your two insurance companies will need to agree on who will cover what part of the claim, which can dramatically extend the time it takes for you to receive a settlement.

Finally, it is important to note that insurance companies may accuse you of double-dipping or fraud if you attempt to make two claims for the same accident. This can result in both companies refusing to pay out and leaving you without coverage. Therefore, while overlapping auto insurance may be legal in some states, it is generally not recommended as it can lead to unnecessary costs, complications, and legal issues.

Two insurance companies may refuse to pay out on a claim

While it is not illegal to have overlapping insurance policies, it is not recommended. In the event of a claim, the two insurance companies may refuse to pay out. Here are some reasons why:

Legal Battle

The two insurance companies may get into a legal battle over which company is responsible for paying out the claim. This will cause delays in the payout, leaving you without coverage even though you paid double the premiums.

Accusation of Unjust Enrichment

Both insurance companies may accuse you of unjust enrichment, which means you are trying to profit by filing two claims. Insurance is meant to compensate for losses, not make you richer. You may even face criminal charges as a result.

Slow Compensation

Even if having two insurance policies is legal in your state, expect a long wait for compensation while the two companies argue over their respective contributions.

Increased Costs and Loss of Discounts

If you make a claim with both insurance companies, your renewal price will likely increase significantly for both policies. You will also lose any no-claims bonuses from both providers.

Complicated Claims Process

With two insurance policies, the claims process becomes more complicated. Both insurance companies will need to agree on how much each will cover, which can extend the time it takes to receive a settlement.

Rise in Premium Costs

Following a claim, the premium costs from both insurers will likely increase.

Loss of Good Driver Discount

If applicable, you could lose your good driver discount on both policies.

In summary, having overlapping auto insurance policies can lead to a range of issues, including legal battles, accusations of fraud, delays in compensation, increased costs, and a more complicated claims process. It is essential to carefully review your insurance policies and ensure you have the necessary coverage without overlapping policies.

It is considered fraud to file two claims for the same incident

In the case of an accident, the claimant can file multiple suits if multiple parties are at fault or if multiple insurance companies are involved. This is called joint and several liability. With joint liability, every at-fault party is legally accountable for any recoverable damages. With several liability, each at-fault party is only liable for a percentage of the damages, based on their degree of fault.

In the US, the rules around double insurance vary from state to state. In the UK, it is not illegal to have overlapping insurance policies, but it is not recommended. If a claimant has two insurance policies and tries to file two claims, both insurance companies will be in touch with each other to establish how much they need to pay and may disagree, delaying the claim significantly.

Double insurance does not mean double the protection

While it is not illegal to have overlapping auto insurance, it is generally not advisable. Although having double insurance can provide added protection in some cases, it does not mean double the protection in the context of auto insurance. Here are some reasons why:

No Double Payout

Although you may think that two insurance policies mean double the payout, that is not the case. In the event of an accident, you can still only make one claim, as making more than one is considered insurance fraud, also known as unjust enrichment. This means that you will not receive double the compensation, even if you are paying for two policies.

Complicated Claims Process

Having overlapping auto insurance can make the claims process more complicated. Both insurance companies will need to agree on how to handle the claim, which can result in delays. The companies may also dispute over which policy should take precedence, leading to further complications and frustration for the policyholder.

Increased Costs

With double insurance, you will be responsible for paying two separate premiums, which can be very expensive. Additionally, your premium costs from both insurers are likely to rise after a claim. You may also lose any no-claims bonuses or good driver discounts from both policies.

Coverage Requirements

Each insurance policy may require you to add all drivers in your household and all vehicles parked at your address to your coverage. This can significantly increase your auto insurance costs. In most cases, it is more cost-effective to share a single policy with other drivers in your household.

Potential for Fraud

Having overlapping auto insurance can raise concerns about potential fraud or moral hazard. Policyholders with double insurance may be tempted to inflate claims or cause intentional damage to take advantage of multiple policies. This can undermine the integrity of the insurance system and contribute to higher premiums for everyone.

In summary, while double insurance can provide some added protection in certain situations, it does not mean double the protection in the context of auto insurance. It is important to carefully consider the potential drawbacks, including increased costs, a complicated claims process, and the risk of fraud, before deciding to take out two auto insurance policies.

You can avoid overlap by checking policy terms and conditions

While it is not illegal to have overlapping auto insurance policies, it is generally not recommended. Overlapping insurance can lead to complications and increased costs. Therefore, it is important to carefully review the terms and conditions of your policies to avoid any overlap.

• Review the small print: When renewing your auto insurance, carefully read the fine print of the policy documents. This will help you understand the coverage, limitations, and potential overlaps with other policies.
• Check for automatic renewal: Some insurers offer automatic renewal, which may be explicitly stated or hidden in the small print. Be aware of this to prevent accidental overlap when switching insurers.
• Understand your coverage: Know what is included in your policy. For example, breakdown cover is often included as standard, so you don't need to purchase separate coverage.
• Check bank accounts and credit cards: Sometimes, these may offer certain types of insurance coverage that could overlap with your auto insurance.
• Be mindful of renewal dates: Keep track of your auto insurance renewal dates to ensure there is no overlap with a new policy. There is usually no grace period for car insurance, so your current policy will expire at the exact time specified.
• Communicate with insurers: When switching policies or insurers, inform both your old and new insurance company of the change. Provide them with the relevant dates to avoid any accidental overlap.
• Request cancellation: Draft a cancellation request for your previous insurance policy, ensuring it is effective on the same day your new policy becomes active. Submit the request along with any required documentation as per the insurer's policy terms.
• Consider backdating: If there is a delay with your new insurance company, you may need to backdate your policy to avoid a lapse in coverage. This typically requires a letter stating there were no known losses during the backdated period.

By diligently reviewing and comparing the terms and conditions of your auto insurance policies, you can avoid overlap and its potential consequences, including increased costs and complications in filing claims.

Frequently asked questions