What Happens If You Loan Your Car to a Friend?
We’ve all been there—your friend needs to borrow your car for a quick errand, and you hand over the keys without much thought. But what happens if they get into an accident while driving your vehicle? Many car owners assume their friend’s insurance will cover any damage, but that’s not necessarily true. Here’s what you need to know before loaning out your vehicle.
Whose Insurance Covers Who When a Friend Drives Your Car?
As the car’s owner, your insurance is the primary coverage in the event of an accident—even if you weren’t the one driving. Auto insurance follows the vehicle, not the driver. This means that if your friend is involved in a collision while using your car, it’s your policy that will be used to cover physical damages first.
Consider this scenario: your friend from another city comes to visit, and you let them borrow your car to get around. Everything is going smoothly until they’re involved in a minor fender bender. Your first instinct might be to rely on your auto insurance, but there’s one hitch—if you don’t have adequate vehicle coverage, your policy might not fully cover the insurance claim.
Your friend’s auto insurance could extend coverage to a borrowed vehicle, but limitations exist. For example, if both party’s insurance doesn’t fully cover the damage, you could be on the hook for out-of-pocket expenses. Additionally, further challenges could arise if the other driver involved in the accident is uninsured or underinsured, especially when it comes to liability.
What are my Coverage Options?
Understanding your insurance coverage options can help you make informed decisions before lending out your car. Check out our blog on Common Car Insurance Myths for more details! Here are three key areas to consider:
1. Comprehensive and Collision Coverage
These coverages help pay for damage to your vehicle, whether from an accident, theft, vandalism, or natural disasters. If you have comprehensive and collision coverage, your insurance should pay for physical damage to your car minus your deductible. However, it’s essential to check the specifics of your policy, as some insurers may have exclusions or restrictions when someone not listed on your policy is driving.
2. Liability Coverage
Liability coverage pays for damages to other vehicles or injuries to others if your friend is at fault in an accident. Some policies offer limited or no liability coverage for drivers not named on the policy. If your coverage falls short, your friend’s insurance may be required to cover the remaining costs. However, you could be liable for damages if they don’t have insurance or inadequate coverage.
3. Permissive Use vs. Named Drivers
Some policies extend coverage to drivers who have your permission to use the car, while others require drivers to be explicitly listed on the policy. Understanding these terms can prevent unexpected gaps in coverage.
How to Protect Yourself Before Handing Over Your Keys
Before loaning out your car, take the following precautions:
- Check your insurance policy to understand what is and isn’t covered when another driver uses your vehicle.
- Ensure that your friend has a valid driver’s license and their own auto insurance.
- Set clear boundaries—only lend your car to someone you trust to drive responsibly.
While letting a friend borrow your car may seem harmless, it’s essential to consider the potential financial and legal consequences. If an accident occurs, your insurance will likely take the hit first, and you could be left dealing with increased premiums or even out-of-pocket costs. Speak with a Bauld Insurance Advisor about how to add it to your policy and protect yourself, your assets, and your business.
