The sister that wants to insure both vehicles can ask her insurance agent if the insurance company she is with will allow her to insure her sister's vehicle that is in a different city. Insurance company's guidelines differ but normally an insurance company would not allow the out of town sister's car to be placed on the policy since the car is garaged in a different location and the sister is not a household member of the policyholder's resident.

Insurance companies typically do not insure vehicles that reside at a different household or for more than one household on one policy. Thus to get a definitive answer the sister wanting to place the other sister on her policy would need to ask her insurance agent if this is possible or call around to see if another insurance provider would allow this.

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Comment Update: It is not likely that a company would accept this type of liability. Also, many state insurance laws make it impossible.