Borrowing and Loaning Cars
From time to time, a friend or family member (not on your insurance policy) may ask to borrow your car. While you might agree when asked, there are some potentially serious consequences that could arise if they're involved in an accident.
The same concerns could apply to you if you borrow someone else's car. It is important to understand how auto insurance policies apply when a car is borrowed or loaned to another driver.
Understanding Your Auto Insurance Policy
Your auto insurance policy has different types of coverage that apply to a variety of circumstances. Almost all states require liability coverage. Other types of coverage on your policy might be optional, dependent on where you live, your insurer's requirements, and other factors such as your age and driving record.
The different types of coverage under your auto insurance policy could include:
- Liability coverage for at-fault accidents.
- Collision coverage for at-fault accidents.
- Comprehensive coverage for arson, theft, and falling objects.
- Medical coverage for injuries.
- Underinsured and uninsured motorist coverage.
Named Driver Riders
Some states allow named driver riders on a car insurance policy. A named driver rider stipulates that liability coverage is only provided for the drivers specifically named on the policy.
This means that if a named driver clause is in your policy and you loan your car out to a friend or family member who does not live with you and is not named in the policy, no payments would be made in the event of an at-fault collision.
Some named driver clauses also apply to the drivers who live with you. If your spouse or child is not named on your policy and wrecks the car, the insurer is not required by law to make liability payments. Your declaration page will list the named drivers to whom liability coverage applies.
What Happens If Someone Else Wrecks Your Car?
In most cases, your liability coverage provides the payments for damages caused when a someone else is involved in an accident while using your car. If you borrow someone else's car and cause an accident, your friend's liability coverage pays for the damages. Remember, with liability coverage, damages are only covered for the other vehicle.
Liability coverage is typically designed to include people who are driving a car with the owner's permission. Permitted drivers could include a spouse, child, parent, sibling, roommate, or friend who does not live with the car's owner.
If your vehicle's liability coverage is insufficient for the damages caused by the person borrowing your car, that driver's insurance could act as a backup for providing additional damage payments. If an investigation shows your friend is at least 51 percent at fault for the accident, you could get a liability surcharge upon renewal of your policy.
Vehicle Insurance Policies vs. Driver's Insurance Policies
If your friend is driving your car and a tree falls on it or the vehicle is damaged in a single-car accident, collision and comprehensive coverage might not be applicable. This could leave you with no coverage for repairing your damaged car.
If your car is stolen while your friend is driving it, the theft must be reported to the police for comprehensive insurance coverage to apply. Keep in mind that for each car insurance policy claim, there will be a separate deductible. You and your friend would have to decide who is paying the deductibles related to the accident claims.
If you borrow someone's car, ask them about the owner's insurance coverage. When someone asks you to borrow your own car, you should consider that person's driving record AND driver's license status.
A person who wrecks your car could impact your future car insurance coverage and policy rates. Before handing over your keys, look into the details of your policy and the borrower's insurance so you have a full understanding of the levels of available coverage.