Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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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

UPDATED: Oct 14, 2020

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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 mid-term can create a bit of confusion.

You need to worry about selecting the right effective date and you need to find out whether or not the company will charge you an early cancellation penalty.

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

While it might seem as if you would have double the 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.

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Table of Contents

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 or not there was 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. For 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.

– 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.

When 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

If you do not, you may bind cover for the car when it has temporary protection that you have already paid for in the financing.

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Problems that Can Arise Because of Coverage Overlapping

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.

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 between one another.

Their goal is to avoid paying a claim.

It is even possible that the company could deny your claim entirely for violating the terms of their contract and carrying two policies at the same time because 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.

–Claims Delays

When you add another insurer into 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. 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.

How You Can Avoid a Coverage Overlap

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

You might be worried about having a coverage 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
  • Step 2 – Choose an effective date for your new policy and make payment to activate
  • Step 3 – Once policy is issued, draft a cancellation request with the same effective date and submit to your insurer
  • Step 4 – If backdating cancellation, provide proof of duplicate coverage
  • Step 5 – Give agent your address for any short-rate or pro-rated refund

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

If you need help find 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!

References:

  1. http://www.ehow.com/facts_6890134_overlap-car-insurance_.html
  2. https://www.progressive.com/auto/
  3. https://www.thebalance.com/what-is-an-insurance-renewal-527419
  4. http://www.naic.org/documents/consumer_alert_getting_engaged.htm
  5. http://legal-dictionary.thefreedictionary.com/unjust+enrichment
  6. http://finance.zacks.com/can-car-two-separate-insurance-policies-two-different-people-10938.html
  7. https://www.nationwide.com/car-insurance-lapse.jsp
  8. http://insurancegeek.typepad.com/ask_tim/2010/08/the-insurer-has-to-backdate-a-cancellation-when-the-customer-replaces-coverage-right.html