How Does Insurance Work If I Let Someone Borrow My Car?

Lending your car to a friend or family member is often an act of kindness and convenience. However, it can also lead to complications when it comes to your car insurance coverage. Here’s a comprehensive guide on how insurance works when you let someone else drive your car.

Your Insurance Is Primary

The most important thing to understand is that when you lend out your car, your insurance policy becomes the primary coverage. Car insurance follows the vehicle, not the driver. So even if the person borrowing your car has their own insurance, yours will be used first to cover any damages or liability in the event of an accident.

Your friend’s insurance may provide secondary coverage if your limits are exceeded or don’t fully cover the damages. However, you can’t rely solely on their policy to handle problems that arise while they drive your car.

Covered Drivers

In most cases, your insurer will extend coverage to anyone you give express permission to drive your car. This includes friends, family members, neighbors or babysitters. However, coverage may not apply if the driver:

• Is specifically excluded on your policy
• Lacks a valid driver’s license
• Uses your vehicle without your consent
• Is under the influence of drugs or alcohol

You also need to be sure that you inform your insurer about any regular or frequent drivers of your vehicle, like a babysitter or relative living with you, even if they have their own insurance. They may need to be listed on your policy to be fully covered.

At-Fault Accidents

If your friend borrows your car and gets into an at-fault accident, your liability coverage will typically pay for injuries or damage to the other driver’s vehicle. However, your collision coverage likely won’t pay for damage to your own car unless you have that optional coverage and pay the deductible.

So even though your friend was at fault, you may be stuck paying out-of-pocket for repairs to your vehicle if you only carry liability coverage. This is important to understand before allowing others to drive your car. You could be on the hook for thousands in damage costs.

Exceptions

There are some exceptions where your insurer may not extend coverage to another driver:

• Underage driver – If the borrower is under the legal driving age in your state, your insurer will not cover an accident they cause.

• Suspended license – Anyone driving your car without a valid license is generally excluded. This includes drivers with suspended, expired or revoked licenses.

• Excluded driver – If you specifically excluded the borrower from your policy to receive lower rates, then an accident won’t be covered.

• Frequent use – If the borrower uses your vehicle on a regular basis but is not named on your policy, your insurer may deny coverage.

So it’s essential to verify that the person borrowing your car is legally allowed to drive and not specifically excluded from your policy. Otherwise, you may jeopardize your coverage.

Liability Limits

Most states require minimum liability limits for bodily injury and property damage, but accidents can often exceed those minimums. If your friend causes an accident that surpasses your coverage limits, then their own car insurance may have to cover the excess amount.

For example, if you only carry the minimum 25/50/15 liability limits:

• $25,000 bodily injury per person
• $50,000 bodily injury per accident
• $15,000 property damage

But the accident results in $30,000 in medical bills for the other driver and $20,000 in car repairs. Your policy would cover the first $25,000 in medical bills, while your friend’s insurance picks up the remaining $5,000. You’d also have to pay $5,000 out of pocket for property damage unless you carry higher limits.

That’s why it’s wise to inform the other driver of your coverage limits so they can verify if their own policy could help fill a gap. You may even consider temporarily adjusting your own limits if you plan to lend out your vehicle frequently.

Traffic Violations

Any traffic tickets incurred by the other driver typically won’t impact your insurance rates or record. Speeding tickets and other infractions like DUIs or reckless driving usually follow the actual driver, not the vehicle owner or policyholder.

So if your friend borrows your car and gets pulled over for speeding, they’ll receive the citation along with any points added to their driving record. Your rates and driving history will be unaffected by their traffic stop.

Damage Claims

To recoup costs for any accident-related repairs or damages, you’ll need to file a claim through your own insurer since that’s the primary policy in force. Your rates may increase at renewal time after filing a claim, even if you weren’t driving at the time of loss.

Some insurers may not raise your rates for a first at-fault accident, but surcharges often apply after multiple claims. And even not-at-fault claims can sometimes impact your premiums down the road.

Communication is Key

Any time you lend out your vehicle, it’s critical that you communicate with both your own insurance provider and the other driver about coverage implications. Contact your insurer to notify them of the situation and verify the other driver is fully covered to operate your vehicle.

You’ll also want the other driver to be aware of your policy limits, deductibles, and any potential gaps in coverage. Making sure all parties understand the insurance dynamics helps prevent unpleasant surprises in the event an accident occurs.

Expert Recommendations

Here are some best practices when allowing others to drive your car:

• Inform your insurance company about any regular drivers of your vehicle.
• Only lend your car occasionally to friends/family and avoid high risk drivers.
• Ask to see the driver’s license to verify it’s valid.
• Provide clear guidelines on use of your vehicle like avoiding certain roads.
• Check that liability limits are sufficient if an accident occurs.
• Ask if their insurance covers driving borrowed vehicles.
• Document your permission to drive the car through text, email or written note.
• Caution them to drive carefully as you don’t want rates increased.

The Bottom Line

Lending your car to friends or family members can seem like no big deal. But there are definitely insurance implications to consider before handing over those keys. Ultimately, your auto policy provides primary coverage when allowing others to drive your vehicle.

However, you do risk claims against your policy and potential rate hikes even if you weren’t driving at the time of an accident. Weigh these factors carefully, communicate with your insurer and the other driver, and only lend your car occasionally to avoid insurance complications down the road.