People loan cars to friends and family members all the time. If a roommate asks if they can drive your car to the store to pick up some groceries, you may not think twice. If a sibling asks to borrow your vehicle to go to school, you may let them do it if you don’t need the car that day.
Most of the time this is fine, and the vehicle gets returned in perfect condition. But there are also situations where car accidents occur and vehicles are severely damaged or even totaled. If someone was borrowing your car when they crashed it, who has to pay? After all, you may know that you have insurance, but this is a policy that you purchased. Is the other person’s insurance supposed to cover the vehicle if they were the one driving it?
Loaning your insurance policy
Perhaps the easiest way to remember how this works is that the majority of insurance policies are going to follow the car. It is the car itself that is insured. If anything happens to that vehicle, the insurance company will cover the damage that has occurred. It doesn’t necessarily matter who is driving. There are plenty of cases in which a car is stolen or damaged and no one was driving it at all. Maybe it was parked on the side of the road when it was hit. Regardless, even if someone else was behind the wheel, your insurance policy still applies to your vehicle.
What if they also have car insurance?
The other person may also have car insurance. For instance, maybe your roommate’s car is just in the shop, and that’s why they wanted to borrow yours. Even so, it is still your policy that is on your vehicle, and so it is that insurance coverage that will pay for any damage that happens while your roommate is driving.
Does this mean your rates will go up?
This is the risk you take if you loan out your vehicle. It is still covered. Your roommate could make a mistake that you never would have made and total your vehicle, and it will still be covered by insurance. However, your insurance rates could go up because this other individual got involved in an accident.
In fact, there are cases in which people who live in your house are required to be added to your insurance if they’re going to be using your car. This often happens with children who are using their parents’ vehicle, for example. Adding another driver to your insurance policy can also cause your rates to increase. This is especially true with young drivers or those who have a history of getting involved in car accidents.
What if they don’t live with you?
In some cases, the individual will not live with you, and so the insurance company will not ask you to put them on your policy. Perhaps the person was just a friend who borrowed your car in a one-time event and it is unlikely they will ever do so again – especially because they got in an accident. In a situation like this, your car should still be covered, although your insurance provider may ask for proof that the other person does not live in your household. Additionally, the amount you pay for insurance could still increase, as noted above. You could also miss out on things like good driver discounts or accident-free driving discounts.
Why insurance is important for borrowed cars
All of this can make it sound rather frustrating to loan your car to someone because your insurance is on the hook, and you do want to consider that before you ever let someone else drive. But this also demonstrates why it is so important to have coverage on a car that you loan to someone else. If their coverage is not going to pay for any damage, then you would be taking a major risk where an accident could mean the loss of your vehicle. With the proper coverage, you at least know that your vehicle will be fixed or replaced, even if this other individual causes your rates to go up.
Here at Frisco Insurance, we can use our expertise to find you the perfect policy in your situation. Just call us now to get started.