Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: May 3, 2022

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Here's what you need to know...

  • Coverage overlap is when you pay for two policies at the same time
  • Couples and married couples usually combine policies to save money
  • There are many things you can do to avoid an overlap of car insurance

Switching an auto insurance policy midterm can create a bit of confusion. Many people do it because another insurance company offered them a lower annual premium or better service. Maybe they’re mad because their old insurance company didn’t take care of them. Whatever the case is for you, choosing the right effective date can go a long way.

You need to worry about selecting the right effective date, and you need to find out whether the company will charge you an early cancellation penalty.

When you choose a new auto insurance provider, your coverage starts as soon as a policy number has been assigned. Prior to this, an insurer may issue a binder showing you have coverage while they’re completing the underwriting process. If the rate changes, you may not want to switch.

Car insurance overlap essentially means that you are paying for two car insurance policies at once.

While it might seem as if you would have double protection when you have a coverage overlap, that is not the case due to the fact that filing a claim for the same incident in an effort to double-dip is against the law. A short overlap could save you a lot of money if there’s any delay in the assignment of a policy number or if you change your mind. Keep in mind, even one day without coverage could be devastating if you get into an accident on that day.

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What are the common causes of car insurance overlaps?

There are a variety of different scenarios where overlapping of car insurance may occur for a short period of time.

In some cases, you are aware of the time period where there is double coverage, and in others, vehicle owners may not even know the overlap existed.

Here are some of the most common scenarios where you should verify whether there is a coverage overlap after binding new insurance:

– You Buy New Insurance and Wait for Your Existing Cover to Cancel

Perhaps the most common reason why you policyholders have an overlap is when the owner decides that they would like to comparison shop before their existing car insurance comes up for renewal.

It is not until your car insurance renewal date that the car insurance will automatically expire. Those who decide to bind their new policy at lower rates before the rates change need to cancel their coverage.

If they decide to buy the new plan early and do not put in a cancellation request, they will have a voluntary coverage overlap. Sometimes your new auto insurance company will take care of this for you. Often, they do not. If you do not cancel, they also won’t refund payments for time when you kept your policy active.

– You Combine Your Car Insurance with a Spouse

When couples marry or combine their households, it can save money to combine car insurance policies. When each party has a different insurer, the couple must decide which insurer to stay with.

Simply not paying to let it lapse will create an issue of overlapping for as long as the policy is paid up.

Once you add your vehicle to the other insurance policy, you need to actively cancel the policy that you do not intend on keeping. You might think it is better to let it lapse, but that can actually create more problems.

– You Have Automatic Dealer Coverage

When you purchase a new vehicle, some dealers will throw in automatic coverage to help you avoid the hassle of buying coverage while you are going through the car-buying process. Some car manufacturers have run entire campaigns on this premise. They offer free coverage for the first year.

If you have this coverage, you should check to see when it expires before selecting an effective date for your permanent plan. If you do not, you may bind cover for the car when it has coverage already. Keep in mind, any time you switch auto insurance, you’ll lose any loyalty discounts or accident forgiveness. This could lead to higher rates when you switch back to paying for your own collision coverage.

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Can overlapping coverage cause problems?

There can be some major double-car insurance dilemmas when you choose to have or unknowingly have an insurance overlap. Stacking coverage is legal in some states, but even the states where it is legal, there can be issues when a claim is filed. Your insurance companies may argue about who is actually responsible. Yes, your policies were both effective during that time, but you don’t always get to choose which policy overrides the other.

You should know about when and if your overlapped coverage will pay out before you elect to carry two policies at once.

– Insurance Company May Deny Your Claim

If you have a loss while there are two companies covering the car, there is a good chance that the companies will begin to communicate. Their goal is to avoid paying a claim if they don’t have to. Generally, if there’s a question about who pays first, the insurance company with the earlier effective date would be the first to pay.

Unfortunately, it is possible that the company could deny your claim entirely for violating the terms of their contract and carrying two policies at the same time. It violates the unjust enrichment clause.

This clause basically states that it is against the terms of the policy to carry two policies because the policyholder may be able to profit from a claim instead of just recouping on a separate policy. The idea behind auto insurance is to make you whole after a loss, not to be a moneymaker.

–Claims Delays

When you add another insurer to the claims process, there will inevitably be delays. It already takes longer than most would prefer to have a claim investigated and settled.

When you add in another insurer that is trying to justify why they should not pay the loss, it only creates complications and serious claims processing delays.

This is especially true when you have more coverage on one policy than the other, and it can add stress to an already stressful situation. To avoid delays and the debate as to which company must pay, it is best to only carry a single plan at any given time.

–Paying Extra Premiums

This is the most obvious problem with having 2 policies for any length of time. You’re paying for 2 policies when you only have to pay for a single policy to be protected. Your old insurance carrier can only issue prorated refunds starting at the date you call to cancel.

How can you avoid coverage overlap?

Avoiding overlapping car insurance when you are buying personal insurance for your vehicle is much easier than you might assume.

You might be worried about having insurance lapse when you are switching companies, but it is actually much easier than you might think to prevent this from happening.

Take these steps so that you do not have lapses or overlaps:

  • Step 1 – Request quotes and choose a new plan with collision coverage or whatever additional coverage you want. Be honest about your driving history and if you have high-risk drivers in your home. Any inconsistencies could drag the process out even further.
  • Step 2 – Choose an effective date for your new policy and make payment to activate.
  • Step 3 – Once the policy is issued, draft a cancellation request with the same effective date and submit it to your insurer.
  • Step 4 – If backdating cancellation, provide proof of duplicate coverage.
  • Step 5 – Give the agent your address for any short-rate or prorated refund.

Your insurance carrier is required by law to backdate a cancellation when you have proof of active cover elsewhere.

If you need help finding a new policy to purchase so that you can save money off of your premiums, start comparing car insurance rates now by entering your zip code in our FREE tool below!