One vehicle, two motor policies: Who pays?

Motor insurance in India is meant to provide certainty at the moment you need it most; after an accident, theft, or damage. But what happens when a vehicle ends up being covered by two motor insurance policies at the same time?

Many vehicle owners assume that “more insurance” means more protection. In reality, overlapping motor policies can create confusion, disputes, and delays at the claims stage.

This article explains how insurers treat multiple motor insurance policies, what indemnity is, what the principle of contribution means, and why, in a recent consumer court ruling, only one insurer was directed to pay, even though two policies were active.

Why would two motor policies exist on one vehicle?

Having two active motor insurance policies is more common than people realise. It usually happens unintentionally, such as:

• Buying a new policy before the old one expires, without cancelling the earlier cover
• Switching insurers mid-year and forgetting to formally terminate the previous policy
• Dealers bundling insurance during resale or transfer of ownership
• Misunderstanding renewal dates

Importantly, Indian law does not prohibit having two policies for the same vehicle. The problem arises only when a claim is made.

A contract of Indemnity

Motor insurance (except personal accident cover) is a contract of indemnity. This means:

• The insured can be compensated only for the actual loss suffered
• There can be no profit from an insurance claim
• Even if multiple policies exist, the total payout cannot exceed the loss

This is where the concept of contribution comes in.

What Is the principle of Contribution?

Contribution is a legal principle under general insurance. It applies when:

1. The same subject matter (the vehicle)
2. Is insured against the same risk
3. With more than one insurer
4. And a loss occurs

In such cases, insurers are expected to share the claim proportionately, based on their respective sums insured.

For example:

If a car suffers damage of ₹10,00,000 and has 2 policies with 2 different insurers:

• Policy A pays ₹5 lakh
• Policy B pays ₹5 lakh

Each insurer may contribute 50% of the loss.

However, contribution is an inter-insurer arrangement. It is not meant to burden the policyholder.

No burden on the Policyholder

The insured is not required to chase multiple insurers to make their claim “fair”.

In practice:

• The policyholder can approach any one insurer
• That insurer must process and settle the claim
• If contribution applies, insurers must recover proportions among themselves

Insurers cannot lawfully reject a claim simply because another policy exists.

A recent Court Case

A recent consumer court decision from Jharkhand offers a clear illustration of how Indian law views overlapping motor insurance policies.

In this case, a car owner (Mr. Lohani) faced an accident during a period when two comprehensive motor insurance policies with two insurers (Universal Sompo and Cholamandalam MS)were simultaneously in force. The vehicle owner reported the loss to Universal Sompo, submitted the required documents, and was issued a claim reference number. Months later, the claim was rejected on the ground that another policy was also active and that a “no-liability certificate” from the second insurer had not been produced.

The consumer forum disagreed with this approach and held the insurer liable. Crucially, the principle of contribution did not apply in the manner the insurer claimed as this is a matter for insurers amongst themselves after the insured is compensated. It is not a pre-requisite for paying the claim.

If you have two policies that cover the same vehicle…

• You cannot claim twice for the same damage
• You can choose which policy to claim under
• The insurer you approach must process the claim
• Contribution, if any, is the insurers’ internal issue

However, overlapping policies may still complicate claims and it is always better to avoid duplication where possible.

To avoid trouble:

• Track policy start and end dates carefully
• Cancel old policies if you switch insurers
• Disclose existing insurance honestly when buying a new policy
• At claim time, file with one insurer only
• Do not agree to informal “settlement sharing” demands

insurancepe reiterates that more insurance does not always mean better protection (under indemnity policies). Insurance works best when it is clear and well understood. Understanding principles like indemnity and contribution helps you push back against unfair claim rejections and delays.

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