The item is actually a family. So is there a way to check each instance of the family separately?
Yes you can check each instance independently by using "For Each"
item overlaps Family:
----->For Each Family:
---------> Check whatever you need here
However, you don't need to do a for each if just want to find out two matching items.
A simple check it should work:
item overlaps Family:
------> "item Name" = "Family.item name": destroy item & destroy family
Edit:
Unless you are overlapping more than two items, in that case, the "For Each" will the best option to find the first matching pair.