Letting a friend or family member borrow your car for a quick run to the store seems innocent enough, but whose insurance pays out in an accident? Most of the time, borrowing is covered by the car owner’s insurance, but it’s important to know who is borrowing your car and how often damage happens.
Is borrowing a car covered by car insurance?
Yes, the car owner’s insurance covers someone else borrowing their car — insurance follows the vehicle first and foremost. You can give anyone permission to drive your car anywhere in the US, and your car likely will be covered by your insurance. The coverage on your policy typically stays the same too, regardless of who’s driving it.
When does car insurance cover a borrowed car?
Letting someone borrow your car or you borrowing another person’s car can happen in a number of ways. All of these situations would get coverage under your insurance policy:
You let your friend take your car to go to the store.
Your coworker uses your car to run a personal errand during lunch.
You let your adult child use your car while they’re visiting for the holidays.
Your friend is the designated driver when you’re having a night on the town.
You go on a road trip with friends and switch drivers.
Also, family members should be covered as drivers named on your policy if they’re a licensed driver living in your household. If you’re unsure about a driver, contact your insurance agent to play it safe.
When wouldn’t my car insurance cover damage?
Your car insurance might not cover your car for damage if it’s borrowed under these circumstances:
People have regular access to your car
Someone doesn’t have permission to use it
You’ve excluded a high-risk driver or someone else from your policy
These situations usually involve family or friends who don’t live at home and sometimes roommates. Insurance companies want any regular drivers or anyone living in your household to be listed as drivers on your policy.
Each insurance company handles these situations differently with some paying a claim and others denying it. If the company denies the claim, any injured people may sue you and the driver for payment.
Compare car insurance for borrowed cars
Who’s responsible for an accident in a borrowed car?
When letting someone borrow your car, several different accident scenarios could happen, and who’s responsible depends on the situation:
1. You lend out your car and the driver gets in an accident.
The claim gets filed under your insurance. Your liability coverage will kick in for the other people involved, paying up to the limits you have on your policy.
If you have comprehensive and collision coverage, your policy will still pay to fix your car if you let someone borrow it. Any deductibles on your policy will apply to the damage before your insurance kicks in.
Will my insurance rates go up?
If you let someone borrow your car and you have to file a claim, it’s likely that your insurance rates will go up. Your rates might not go up if the accident was minor and you haven’t filed any claims in the last few years, the same as if you were driving the car.
The rate increase may happen because the insurance company is holding you responsible for lending out your car.
2. Someone borrows your car and another driver collides with them.
In this case, the claim gets filed under the other driver’s car insurance company as usual. Neither you nor the driver borrowing your car should pay for damage to your car.
3. You lend out your car regularly or for a long period.
You might be responsible for any accident that person causes. To avoid this, you likely need a contract from an attorney signed by the other person, showing that they’re responsible for any injuries and damage while they borrow your car. In this case, the borrowing driver’s car insurance would act as the primary insurance for a claim.
4. Someone steals your car and wrecks it.
If someone steals your car, they’re driving it without your permission, so technically that person would be responsible for any damage they cause.
However, you might not recover your car if someone stole it. Your insurance will pay out for your stolen car if you have comprehensive coverage on your policy.
What to do after a crash in a borrowed car
If you’re involved in an accident while borrowing someone else’s car or vice versa, treat the accident the same as you normally would. The only difference is the insurance claim goes through whoever owns the car.
Call the police to get a report.
Call the insurance company that the car is under. If it’s your car and you’re not there, you still need to immediately report the accident to your insurance company.
Get the other driver’s contact information if they caused the accident. Important details include their name, car insurance company and policy number.
Get a damage estimate and keep any bills or invoices related to the accident.
Your insurance policy will cover any liability claim automatically while you rent, without adding a rental car to your policy.
It will also cover any physical damage to your rental car, but only if you carry comprehensive and collision on at least one vehicle on your insurance policy. Your deductible will still apply to the rental car.
A possible drawback to relying on your insurance policy to cover a rental car is that the claim will affect your insurance rates and insurance history. You might consider either buying coverage from the rental car company or using coverage provided by a credit card that’s already in your wallet. That way a claim with a rental car won’t affect your current car insurance rates.
Should I pay for a small claim myself?
If you’re borrowing a car and have a small accident, it might be better to pay to fix the damage yourself rather than turn in a claim, if you can afford it. When you pay to fix the car out of pocket, a claim won’t be filed and the other person’s insurance rates won’t increase as a result of the accident.
The exact amount it will cost to fix damage to a car depends on the make and model of the car and what type of damage has been done.
Here are the steps to take and factors to consider:
Notify the vehicle owner about the accident.
If you know you can afford a specific amount of money, tell the owner you might be able to afford to fix it yourself.
Get an estimate to fix the damage.
Consider the other person’s insurance deductible and goodwill when deciding.
If the damage falls within your budget and the other person accepts, pay the claim yourself.
The car’s owner will likely be grateful and their rates won’t increase because of your accident.
Keep in mind that even small collisions may need to be reported to the police, even if you don’t file a claim. Check your state laws to find out when a police report is required.
How to prevent accidents when lending out your car
While some accidents are completely out of a driver’s control, there are some steps you can take if you’re letting someone borrow your car or you are borrowing someone else’s car.
If someone is borrowing your car
Be sure you trust that person with your car. If you question their judgment or they have a bad driving history, consider carefully whether you want them to drive your car.
Make sure you have the proper coverage on your car. This includes adequate liability limits and both comprehensive coverage and collision coverage, as well as any add-ons that could be useful.
If the person lives in the same household as you or has regular access to your vehicle, you’ll probably need to add them to your policy as a driver. Doing so can increase your premium, but will ensure a claim is paid if they get in an accident.
If you’re lending someone your car for an extended period of time, consider having a contract in place that requires the other person to have insurance and to take responsibility for an accident.
If you’re borrowing someone else’s car
Make sure they have insurance. If you’re driving a car that’s not insured, you could be hit with fines and your own insurance policy would likely pay the claim, causing your rates to increase.
Your insurance policy could always kick in as a secondary policy if the accident is severe enough, so consider raising your liability insurance limits to increase protection.
Letting someone borrow your car doesn’t have to be complicated, but there are some factors to consider if you want to avoid ending up without insurance coverage after an accident. Car insurance always follows the vehicle first, which means you’ll want to make sure you have proper insurance coverage.
To find out what your insurance options are, be sure to review and compare insurance companies to find the one that best suits your needs.
Common insurance questions about borrowed cars
If the unlisted driver gets in an accident, there could be serious consequences. It will depend entirely on your insurance company, but one of three things will likely happen:
The company will pay the claim and then require you to add that person as a driver.
The company will pay the claim but will not renew your policy at the end of your term.
The company will deny the claim because the driver wasn’t listed.
They can initially deny the claim, but it gets complicated after that. There’s a chance you could fight the denial by taking the company to court, since a car insurance policy allows for anyone to drive your car with your permission.
But court means paying for attorney fees out of pocket, and there’s no guarantee on the outcome.
Buying insurance from a rental car company can be expensive, which is why many people opt not to get it. But there are benefits to doing so.
A claim won’t impact your insurance rates.
You won’t have a deductible under the rental car’s policy.
You can simply return the car and leave, without following up on the claim.
Another option is to have your credit card cover damage to your rental car. But you might find limitations. It may only cover physical damage and not liability, but it can be a cost-effective way to insure a rental car.
Andrew Flueckiger is a licensed insurance agent and Certified Insurance Counselor with experience in insurance and finance. A graduate of Indiana University, Andrew contributes a wealth of knowledge and experience to Finder. When Andrew isn’t writing, reading or practicing insurance, he can be found spending time with his family and playing the guitar.
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