Many people want to know: how do I insure a borrowed car? What happens if a car I borrowed gets into an accident? In general, auto insurance follows the car, not the driver. Regardless of who’s driving the car, the owner of the car (and the insurance holder) is generally responsible for financial damages in combination with their insurance.

We’ll explain how this works for the car owner and the driver who borrowed the car—as well as the exceptions for when this doesn’t hold true. 

A borrowed car is covered by the car owner’s insurance policy when…

Most auto insurance policies have a “permissive driver clause.” That means the car owner can occasionally lend their vehicle out to a friend or family member, and their insurance will still cover any potential damages in accordance with the auto insurance policy.

If you’re the one borrowing the car

If you're borrowing the car that means you aren’t responsible for damages. The person who owns the car and their insurance is responsible for the deductible and for working with the car insurance company if you get into an accident while driving the car.

Although, that’s not entirely true. You could still be responsible for damages after the car owner’s insurance has been exhausted. For example, their liability and collision insurance might help cover damages up to their limits, and then you and your insurance would step in to pay for the rest.

It’s important to note that car insurance follows the car, not the driver. But illegal acts follow the driver, not the car. So if you’re borrowing a car and get a speeding ticket or traffic violation, you—the driver—are responsible for that ticket. Insurance wouldn’t play a role.

If you’re the one lending out your car

If you're lending your car you want to be aware that you are held responsible for anyone who is given permission to drive your vehicle. If they get into an accident and they are found at-fault, your insurance will cover the costs. That means you’ll be responsible for paying the associated deductible, and your insurance could take a hit (and your premiums could rise in the future).

Psst… That means you’ll want to be careful about who you lend your car to. Make sure they have a clean driving record without a lot of at-fault accidents or DUIs, to ensure you aren’t putting your car or insurance at unnecessary risk. 

When car insurance does NOT cover a borrowed car…

There are some instances where the car owner’s insurance does not offer coverage to a borrowed car. 

Frequent drivers: If you regularly loan the car out to someone, your insurance carrier might consider that borrower a “frequent” driver. Insurance companies won’t cover frequent drivers unless they’re listed on your policy.

For example, if you have a friend who’s going to be borrowing your car for two weeks to move into a new apartment, or your sister borrows your car every Sunday to drive to church. Your insurance won’t cover a frequent driver. So, if someone borrows your car for long periods of time or on repeated occasions, you should add them to your insurance policy as an additional driver.

Member of household: If someone in your household borrows the car, your insurance might not cover them if they’re not listed as a driver on your account. That’s because your insurance carrier assumes they might be a frequent driver of the car, so they should be listed.

Excluded drivers: In some instances, it’s financially smart to leave a spouse or teen driver off your car insurance policy if they have a bad driving record that could increase your premiums. Specifically excluding them from the policy minimizes your driving risk, which in turn lowers your auto insurance premium. But if an excluded driver is borrowing your car, your insurance company will not cover any damages if they get into an accident.

Business driving: If someone is borrowing your car for business or commercial purposes, your standard auto insurance becomes null. This can include if someone’s using your car to make a sales call, to take a client out to lunch, or if they’re an Uber driver with your car. Generally, any sort of business conducted in a borrowed car is not covered by the car owner’s insurance policy.

Uninsured driver: Even though car insurance follows the car, if you lend the car out to a driver that doesn’t have a license or their own insurance, your insurance company might not pay for any damages they cause. You could be fully responsible for any accrued costs.

If you don’t give permission…

If you have not given permission to someone to use your car, you are not responsible for any damages they occur. This includes a thief who steals your car as well as someone who asked for permission and you explicitly denied it.

It’s important to note, though, that most insurance companies will assume someone had your permission to drive the vehicle. For example, if your teenage daughter doesn’t ask your permission but takes the keys to sneak out of the house… you could still be liable for her damages, even though she didn’t ask permission. 

If the driver of your car is not at fault for the accident…

Let’s say you lend your car out to a friend and they get into an accident, but the accident wasn’t their fault. If the other driver is found at-fault, your insurance won’t take a hit. You can file a claim with the insurance of the at-fault party to get your vehicle and medical expenses covered.

However, you’re responsible for the headache of working with the insurance company or suing. The driver who borrowed your car doesn’t have to deal with this.

Be careful lending your car

Basically, if you’re lending out your car, you’re lending out your insurance.

If a trusted friend needs to borrow your car for an hour while theirs is in the shop, lending your car shouldn’t be a big deal. If they get into an accident, your auto insurance will likely still cover your car and associated costs up to your limits. (That means you will be responsible for the deductible and “hit” to your insurance, though.)

If you have someone who borrows your car frequently, like a spouse or a nanny, you definitely want to consider adding them as a driver on your insurance policy to ensure the car is still covered in the case of an accident while they are driving.

Before you lend your car, talk to your insurance agent for conditions and restrictions on your policy. You also want to ensure the driver has a valid drivers license and auto insurance, and make sure your car’s registration and insurance are in the glove box.

Not sure what your auto policy’s restrictions and clauses look like? Worried you don’t have the right policy in place? Call one of our expert insurance advisors today at (844) 300-3364!

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