Insurance Coverage When Borrowing or Lending a Car

February 10, 2017

Does my car insurance cover me if I drive someone’s car or a friend drives my car?

Many of us have been in a situation where we have either loaned or borrowed a car from a friend, roommate or family member. But what happens in these situations if someone gets into an accident? This is when it gets a little more complicated.

Generally, insurance coverage follows the vehicle rather than the driver. As long the owner grants permission, their car covers a claim even if someone else is driving.

The borrower’s insurance is secondary. This means that in the event of an accident, their insurance can apply if the owner’s insurance is insufficient to fully cover the damage.

Let’s break up the two situations and take a look at what happens in each.

Someone Else Drives Your Vehicle

First, lets look at the situation where you are lending a car. Although auto insurance policies will vary, the general rule of thumb is that anyone living in your house is typically covered when driving your car unless they are specifically excluded in the policy. In many cases, you are actually required to include everyone in your household on your vehicle’s insurance policy. This means your policy will also cover any family that you live with.

What about friends and family members who don’t live with you but borrow your car occasionally? They can borrow your car under permissive use. This means if you give another driver permission to take your car, your car insurance will cover them. Keep in mind this means that YOUR policy provides the primary coverage, not their policy.

friend drives your car and gets into an accident

For example, let’s say you let your roommate, Rachel, borrows your car for the day. Rachel is in a hurry on her way home from work and accidentally rear-ends a driver in her office’s parking lot. In this case, your liability coverage would be the primary coverage that would pay for the damages that occurred.

What this means is that you would have to file the claim with your company and pay the deductible. Keep in mind that the accident may also affect your insurance costs and that you will have to accept any increases in rates that result from this event. If the damages exceed your limits, Rachel’s insurance coverage will step in as a secondary coverage to assist with the payments.

What if Rachel still got into an accident, but it wasn’t her fault. In this case, the coverage of the driver at fault will kick in and pay the claim. There would be no effect on your insurance.

A good way to think about this is that car insurance follows the vehicle, not the other way around.

You drive someone else’s vehicle

Now, let’s look at a situation where you are borrowing a car from a friend or relative. In most circumstances, if you get into an accident, your friend’s automotive policy will provide the coverage. This is because in most states auto policies are attached to the car, regardless of who is driving it. As long as you have the owner’s permission to use the car or vehicle, their policy will cover you.

borrowing a friend or neighbors car

Your auto insurance policy will act as a second coverage in the case that the costs exceed your friend’s limits. Your policy will cover anything that the primary insurer’s (your friend’s) policy doesn’t cover. If you don’t have your own insurance and you borrow a car from a friend, you may be personally liable for any damages that occur in an accident, especially if your friend has skimpy insurance coverage. If you would like, you have the option to purchase a non-owner policy that would name you as the primary driver but would not attach the vehicle to your policy. This will allow you to use a non-owner policy as a secondary coverage the same way as your auto policy would if you had one.

Keep in mind that the owner’s insurance only extends to occasional use by other people who are not listed on the policy. If you plan to frequently borrow a car such as three or four times a week to get to work, or borrow a car for an extended period of time such as for the summer, the car’s owner may need to list you on their policy as a driver.

“Permissive Use” Defined

Earlier in this post, we discussed the topic of “permissive use” which means you need permission from the owner in order to have their insurance cover you. It is important to note that there are some exceptions to this.

  • The owner must give permission unless there is a reasonable belief the borrower is allowed to use the car. For example, you may have a close relative or a significant other that may let you drive their car.
  • The borrower cannot give permission to someone else to drive the car. For example, if your teenager borrows your car and allows one of his or her friends to drive it, your coverage most likely will not apply.
  • Coverage will not extend for business purposes. If the borrower is using the car for business purposes, your personal auto policy will not apply.

Ultimately, it’s generally safe to load your friend your car for errands or project. And the same goes for borrowing a car. Just make sure it’s for “normal” use. You’ll want to confirm the car has coverage and that your insurance will apply whether you’re the owner or borrower.

Feel free to give us a call at 415-386-2283 if you have any questions. After all, you don’t want to wait until after an accident to get answers!

Contributor: Smruthi Sriram
All images from Google