Two or More Policies Insure One Car

Lets say you have more than one insurance policy covering a car. (This is based on a true story!) You have a policy with company A to insure the car. You then take out a policy with company B. And you do this accidentally. In other words, you thought policy A had expired but it did not. And you did not intend to defraud anyone.  Then you are involved in an auto accident. Do you call company A or company B?

You should call company A AND company B. Each company insures you. If your damages are $10,000 to your car, they would each be willing to pay $10,000 if the other policy did not exist. But, insurance companies are smart, usually. They have a clause in your policy that says that if there is other insurance that covers the loss, they will only pay a pro-rata share. A pro-rata share is, essentially, their potion of the loss.

Example: Liability insurance with company A is $100,000 per person, $300,000 per accident. Liability insurance with company B is $300,000 per person, $900,000 per accident. If you injure someone, company A will pay 1/4 of the claim and company B will pay 3/4 of the claim. For your collision coverage, they would each pay half.

Why do you have to notify both companies? Because you have the policy and they need to be aware of it. If you do not notify them, you may be committing fraud.

The simple solution is to make sure you only have one policy covering you at a time. But, if this situation comes up, notify both insurance companies.