by Ed Sneneh, Chicago Auto SR22 Insurance Agent

There are many times when the same vehicles happen to have duplicate auto insurance coverage, or be covered by two or more insurance policies. People think that it is unlawful for vehicle owners to have more than one policy on the same car. This article discusses the possible scenarios and potential outcomes for having duplicate coverage on the same vehicle.

Duplicate car insurance coverage on the same vehicle can happen because of a mistake, or because of using another non owned vehicle. Trying to collect from two different companies for comprehensive or collision loss on the same vehicle may be classified as car insurance fraud. This is a clear deliberate violation of the principle of indemnity which states that insured people cannot profit from their insurance coverage.

Duplicate auto insurance coverage may occur as a result of a mistake, such as:

1. Obtaining a regular auto insurance policy, or adding a newly acquired vehicle to an existing policy while the same car has an active temporary insurance with another company.

2. Purchasing a separate policy for an auto by a family member while the same vehicle is covered by a different family member.

If there was a  liability, comprehensive or collision loss, then participating insurance companies would divide the loss equally if the loss was a comprehensive or collision. However, if the loss was a liability loss then each company will  pay its share, which is the proportion  that the company limit of liability bears to the total of all liability limits.

Example for sharing liability limits:

John and Sarah purchased a liability policy covering three vehicles, their own and their son's vehicle (Tim). Unaware that his parents purchased insurance for his vehicle Tim also purchased a policy to cover has Chevy truck. Now the Chevy is covered under two different policies.  If the parents' liability limits was $100,000 and Tim's liability limits was $25,000, then this will be the calculation for paying in case of an at fault accident where Tim's car caused some damage with a cost $10,000.

Total liability insurance on Tim's vehicle = $125,000 ($100,000 + $25,000)

Parent's policy portion is = 80% (100,000 / 125,000)

Tim's policy portion is = 20%  (25,000 / 125,000)

Parent's company share of the loss = $8,000 (80% X 10,000)

Tim's company share of the loss =  $20,000 (20% X 10,000)

A more common scenario for duplicate  auto insurance coverage is when some one with an active insurance policy uses the insured vehicle of someone else, then get into a car accident. If a person gets involved in car crash while operating a non owned auto or any auto used as a temporary substitute, then the company's insurance of that person will be an excess auto insurance, and will pay for any amount above and beyond other collectible insurance.

Example: Assume that Jack has an auto insurance policy with liability limits of $50,000 on his Toyota truck and his friend Jason has a liability policy with a limit of $25,000  for his Ford Explorer. Assume also that Jack got in a crash while operating Jason's Ford causing a damage of $15,000. In that case, the entire amount of $15,000 will be paid by Jason's policy (primary insurance) and Jack's insurance (excess) will not pay anything. However if the amount of damage caused by the crash was $45,000, then Jason's company will pay the maximum $25,000 available on the policy and the balance of the damage of $20,000 (45,000 minus 25,000) will be paid by Jack's company under his Toyota's policy.

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