You may buy a car with your roommate, best friend or significant other, splitting the cost. In addition to splitting the cost of the car, you have to split maintenance costs, annual registration fees and insurance. You may both be covered under your parent's insurance policies or have your own. Legally, one car can have two different insurance policies, but this can cause significant confusion with your insurance provider and may void your policy.
Two different people can legally have two separate insurance policies on a car, but many states frown upon it, and it may violate car insurance companies' policies. It also creates confusion over whose policy covers an incident.
Two Separate Insurance Policies
When you and someone else obtain insurance coverage on the same vehicle, double insurance occurs. If you both are covered on the same policy, there is no cause for concern. However, if you have a policy with Allstate and your friend has a policy with GEICO for the same Honda Civic, confusion can arise.
State Insurance Laws
Many states require you to provide proof of insurance to the state when you buy your car. After that, your insurance company notifies the state whenever you renew your policy or allow it to lapse. Although you still should carry proof of insurance, if you get into an accident, a police officer could locate your insurance coverage amounts and provider in a database. Therefore, although double coverage is not illegal, most states frown upon it. If you and your roommate register the same VIN on an insurance policy, the state could send up a red flag and notify the insurance companies.
Insurance Company Confusion
The problem arises when it comes to who pays what. When you have double coverage and rent a car from a rental agency, it is clear that your insurance coverage pays for everything if you get into an accident. However, when you co-own a car and have two policies, who pays is not clear cut. Usually, if you get into an accident, you contact your insurance company to pay. But what if you and the car's co-owner let another friend use the car? Who pays then? Do you submit to your insurance company, or does she submit to hers? What do you do if someone crashed into your parked car and ran? What do you do if you were both in the car when an accident occurred?
Agree on a Single Policy
The largest risk you have with double insurance is the risk of violating your insurance company's policies. You may outright violate a clause in your policy. If not, you may still be seen as trying to enrich yourself. If both insurance companies take this stance, both could refuse to pay, placing you and your car co-owner in a jam. Because of the confusion, and the resulting nonpayment risk, it is best for you and a co-owner to agree on one insurance policy. You can put both your names on the policy and split the cost. If the other person has poor driving habits and has to pay high insurance rates, it may be better to buy and share a car with someone else.
- USA Coverage: Can Two People Be Insured Separately on the Same Car?
- CarInsurance.com: Can Two People Be Insured on One Car Through Two Different Providers?
- Allstate: Can I Add My Friend To My Car Insurance Policy?
- Admiral: Everything You Need to Know About Doubling up on Insurance and How It Affects a Claim
- Virginia DMV. "Insurance Requirements." Accessed Sept. 20, 2020.
- Justia. "New Hampshire Revised Statutes Title XXI." Accessed Sept. 20, 2020.
- Texas Department of Motor Vehicles. "TexasSure." Accessed Sept. 20, 2020.
Tiffany C. Wright has been writing since 2007. She is a business owner, interim CEO and author of "Solving the Capital Equation: Financing Solutions for Small Businesses." Wright has helped companies obtain more than $31 million in financing. She holds a master's degree in finance and entrepreneurial management from the Wharton School of the University of Pennsylvania.