Sometimes it can be beneficial to have two insurance policies. For example, having a primary and secondary dental insurance policy can help reduce your out-of-pocket costs when facing expensive dental procedures.
Does this mean it's better to have two auto insurance policies? Unfortunately, no. Having more than one car insurance policy on the same car is technically legal, but will usually do more harm than good.
Is it legal to have two insurance policies for the same car?
It isn’t against the law to have two car insurance policies, so you don’t have to worry about running into legal problems from having two insurance policies. You can’t file the same claim twice, however, so just because there isn’t a law against it doesn’t mean it is a good idea to insure the same car with two separate policies.
For example, a driver who has comprehensive insurance is covered against theft, so if their car is stolen they will receive a payout from their insurance company. If that driver has two insurance policies in place on the same car, they can only file a theft claim with one of the policies. Filing a stolen car claim with both insurance companies would be considered insurance fraud and could end with jail time and heavy fines.
What is the downside to having two insurance policies?
There are several potential downsides to having two insurance policies on the same car, including:
Some insurance companies have clauses in their contracts that only allow you to have one insurance policy for your vehicle, which means purchasing a second policy could be a violation of your original insurance plan.
You can only file a claim with one insurance company, which means filing a claim with the second insurance company for the same incident could be seen as insurance fraud.
If the insurance companies find out you have two policies for a single vehicle, they could both refuse to pay a claim and insist that your other insurance company is responsible for the claim, leaving you with no payment at all.
Because you can only file a claim with one insurance company, it doesn’t make sense to pay for a second policy in most situations.
Can two people in the same household have two different auto insurance policies?
Yes, two people in the same house can have two different auto insurance policies. In some cases, like someone who lives with a roommate, both people should absolutely have separate policies. People who are living in the same space but maintain separate finances likely do not have a compelling reason to share auto insurance.
But what about spouses or parents with children who are old enough to drive? In these instances, people can choose to have separate policies, but it is often cheaper and easier to have everyone listed on a single policy. Almost every insurance company offers a multi-car discount, which means you can save money by listing all of your family’s cars on a single policy.
Listing teens and young adult drivers on your policy also allows them to take advantage of discounts that already apply to your policy, like employer discounts and bundling discounts, helping keep their costs much lower than they would be on an individual policy.
Whether people in a household decide to have separate or joint insurance policies, they will still need to list anyone who lives in the home and has regular access to their vehicle as a potential driver with their insurance company. If your roommate occasionally borrows your car, not listing them as a household member on your policy could lead to your insurance denying a claim if they were in an accident.
What is a multi-car discount?
A multi-car discount is a type of car insurance discount offered to someone who insures two or more cars on the same insurance policy. This can be a substantial discount, sometimes 20% or more, and it is offered by essentially every auto insurance company.
There are other potential benefits to insuring all of your vehicles on one policy, like single deductibles. A single deductible means that if you have multiple vehicles damaged in a single accident (for example, if your area has a flash flood and both of your cars are damaged) you would only pay one deductible for the claim instead of one deductible for each vehicle.
Single deductibles and other benefits may be included in your policy or offered as an add-on for an additional fee, so check with your insurance agent to see if this type of benefit is available to you.
How does an insurance company identify insurance fraud?
Insurance companies use computer algorithms, private investigators, and other methods to determine whether or not someone is committing fraud. The FBI estimates that insurance fraud costs $40 billion each year, so insurance companies obviously work hard to prevent and identify fraud. There are several types of auto insurance fraud, including:
Filing a claim for the same accident with more than one insurance company
Submitting claims for damage that never happened
Staging or faking an accident
Hiding/destroying a vehicle and claiming it was stolen
Not including regular drivers on your insurance policy
Inflating the value of items that were damaged or stolen
Registering your car under someone else’s address
If a driver submits the same claim to two insurance companies, the insurance companies will log the information into their systems and it will be added to a drivers C.L.U.E. (comprehensive loss underwriting exchange) report and both companies will be able to see that they paid for the claim. Once they discover that two companies paid out on the same claim, they will take action against the driver for committing insurance fraud.