A standard auto insurance policy includes liability coverage to protect others against damage you may cause to them, whether physically, or to their property. So what happens if you lend your car to a friend?
Car Insurance in the United States
Car insurance in the United States follows the automobile, not the driver. While this may seem relatively straightforward, there are a few nuances you need to consider.
First, the loan of your car to someone else really needs to be a loan. Let’s say your friend drives your car every so often, for an errand or because his or her car is broken down. That is considered a legitimate loan situation. But let’s say you have a roommate who doesn’t have his own car and insurance and he drives your car on a regular basis. In this instance, your insurance company may request you add your friend to your policy as an additional driver. Failure to do so may not necessarily result in your claim being denied if your friend has an accident, but you may find him automatically added later or, if you’re really unlucky, your policy may be cancelled due to your failure to properly report who uses your car.
Second, any driver using a car needs to have a valid driver’s license. While your insurance company may be forced to respond to a claim that happens in your car, you may be open to liability for letting an unlicensed driver operate your vehicle.
What if I Don’t Give Permission?
You generally aren’t held responsible if someone takes your car without your permission. In the event of a theft, the court will likely hold the thief 100% accountable for any damages. Your insurance policy will fix your car under comprehensive and collision.
If a friend borrows your car without asking, any accident he has may be covered under his auto insurance first, if he has it. If he doesn’t, your own insurance will likely have to pay for any damages.
The legalities differ from state to state, especially when it comes to technicalities regarding permissive use. There may also be questions as to who has to pay the deductible if a car is damaged – you or your friend – and who would have to pay any fees not covered by your policy.
Before you loan your car to others, contact your insurance professional for clarification and more information.