What happens if someone borrows your car and gets into an accident? Find out if you're covered by your auto insurance when you loan your car to a friend or family member.
There are many reasons to borrow a car. It could be a breakdown, an errand, a designated driver, or a simple favor. It's not uncommon for one to drive a car that they don't own. Normally, everything goes well. Unfortunately, sometimes borrowed cars are involved in accidents. It can be stressful figuring out whose insurance company is responsible for covering the damages when a crash occurs.
General insurance rules on loaning cars
There are some basic guidelines and rules of thumb. However, car insurance policies can be very different when it comes to loaning your car. For starters, insurance usually travels with a vehicle. So, if someone borrows your car and wrecks it, your insurance is responsible. If the accident is so severe the limits on the owner's insurance are exhausted, the borrower's policy covers the rest. At least it will if they're insured. That will provide some small comfort if the crash totals the car.
Sometimes cars are loaned out without checking that everyone has insurance and that the car is properly registered. If you borrow an uninsured car, you're liable for any penalties that result from this, not the owner. However, owners aren't responsible if their car is used without their permission.
Specific examples when a loaned car is in an accident
Here are answers to questions about what happens when someone not on your policy borrows your car and crashes it.
Q: Will my rates go up?
A: When you loan out your car, you’re agreeing to take responsibility for the driver of your car. Most insurance companies will increase the vehicle owner’s policy premium with an at-fault accident. Insurance companies base your insurance rates on the likelihood of a future claim. Even though you weren’t driving, agreeing to loan the vehicle to someone who crashes it, makes you a higher risk. This higher risk often translates into a higher car insurance premium.
Q: Which type of car insurance covers the vehicles involved in an accident?
A: When an accident occurs, the vehicle whose driver was at fault is covered by its own car insurance policy. If the policy doesn’t include collision coverage, then no such coverage is provided. And, the vehicle’s deductible will apply. Both the vehicle owner and the at-fault driver will need to decide who pays the deductible. Either way, the deductible must be paid, in order for the car to be repaired.
Q: Whose liability will cover the driver? The car’s? Or the driver’s?
First, you need to determine if the car’s insurance policy includes liability coverage, as well as collision coverage. Depending on the scale of the accident, the car's liability coverage may not be enough to cover the damages. If this happens, and the driver has their own insurance, then their policy will pay for the rest. Or they will if the limits are higher than what were on the car driven in the accident.
If the driver of your car is uninsured, and causes an accident, you could be liable for everything. For example, what if the uninsured driver causes a multiple car pileup that exceeds the limits of your insurance policy? The injured parties could sue you for medical fees and property damages in excess of your coverage limits.
Q: If the driver of my car gets a ticket, will it affect my car’s insurance policy?
A: Any citations given to the driver, will not affect your car’s insurance policy. Traffic violations go directly onto the license of the driver, not necessarily the car’s owner. If the driver has car insurance and the accident is reported, their rates may go up because of the ticket.
Special car insurance policies
People that don't own a car but find themselves driving a lot should probably obtain a "non-owners policy." This assures them coverage in case the owner's insurance is inadequate. Some car insurance companies also offer "broad form" insurance that insures the driver and not the car. It's worth noting that not every state allows this, and these policies are uncommon.
And, if you borrow the car often but aren't on the owner's policy, the owner's insurance company may cry foul. They could see this as fraud or non-disclosure of the cars usage. They may claim that due to that, they’re not responsible for damages caused by the unregistered driver. So always be upfront with your car insurance carrier about additional drivers.
Before you lend your car
The best advice is to speak with an car insurance agent about your specific policy. Laws vary from state to state and every insurer is different. However, you don't have to feel like you can't ever lend out your car or borrow someone else's. Just make sure your registration and proof of insurance are in your glove box before the other person takes off. Also, be sure everyone involved is insured so you’re covered if an accident happens--because, well, accidents happen.
More questions and answers regarding the loaning of cars to others
Q: Will I be covered if I borrow my parent’s car once a week without being on their insurance?
A: It depends on the state you live in, whether or not you live with your parents and their insurer. Most carriers will require your name to be added to your parents’ insurance policy if you live at home. Some states require it as well. Do the research and make the appropriate decision based on what you find out.
Q: Is it legal to drive a borrowed car without your own insurance?
A: Yes, it’s legal. Car insurance follows the car, not the driver. So, there’s no question of legality as long as the car you’re driving is insured. Be sure you know where the registration and car insurance card are. If you’re pulled over for a ticket or are have an accident you're going to need them both.
Have more questions about Oregon Car Insurance or Oregon Home insurance contact us at 608-835-2828