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Borrowed car in accident. Whose insurance pays?

What happens if someone borrows your car and gets into an accident? Find out if you are covered by your auto insurance when you loan your car to a friend

Auto Insurance for loaned or borrowed cars

Be it due to a breakdown, an errand, a designated driver, or a simple favor, it's not uncommon for drivers to be behind the wheel of a car they don't own. Normally, everything goes well and cars are returned without incident. Unfortunately, sometimes borrowed cars are involved in accidents. It can be confusing—not to mention distressing—to determine whose insurance company is responsible for covering the damages when a crash occurs. Do you know how your car insurance policy works in this situation?

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General insurance rules on loaning cars

There are some basic guidelines and rules of thumb here, however, each car insurance policy is different when it comes to loaning your car. For starters, insurance usually travels with a vehicle. So, if someone borrows your car and wrecks it, your insurance is responsible. If the accident is so severe that the limits on the owner's insurance are exhausted, the borrower's policy covers the excess, if they have car insurance. That will provide some small comfort if the crash totals the car.

Sometimes cars are loaned out without any verification that everyone has insurance and that the car is properly registered. If you borrow an uninsured car, you, the driver, are liable for any penalties that result from this (such as a ticket), not the owner. However, owners aren't responsible if their car is used without their permission.

Specific examples when a loaned car is in an accident

Let’s take a look at the following questions and answers related to how an at-fault car accident is handled when it’s caused by a driver, borrowing your car, who isn’t listed on your car insurance policy.

Q: Which car insurance covers the vehicles involved in an accident?

A: When an at-fault accident occurs, the car whose fault it was, is only covered by its own car insurance policy. If the policy doesn’t have collision coverage, then no coverage is available. Additionally, the vehicle’s deductible will apply. Both the vehicle owner and the at-fault driver will need to decide who pays the deductible. Either way, the deductible must be paid, in order for the car to be repaired.

Q: Whose liability will cover the driver? The car’s? Or the driver’s?

A: First, you need to determine if the car’s insurance policy has liability coverage, in addition to collision. Depending on the scale of the accident, the car’s liability level may not be enough to cover all the damages. If this is the case, and the driver has their own auto insurance policy, then their policy will pick up any additional liability, if the limits are higher than what were on the car driven in the accident.

If the driver of your car is uninsured, and causes an accident, you could be liable for everything. For example, if the uninsured driver causes a multiple car pileup that exceeds the limits of your car insurance policy, then the injured parties could sue you for medical fees and property damages.

Q: If the driver of my car gets a ticket, will it affect my car’s insurance policy?

A: Any driving violation citations given to the driver, will not affect your car’s insurance policy. Traffic violations go directly onto the license of the driver, not the car’s owner. It’s possible that if the driver has car insurance and the at-fault accident is reported, their car insurance rate may go up because of the ticket.

Q: Will my car insurance rates go up?

A: When you loan out your car, you’re agreeing to take responsibility for the driver of your car. Most insurance companies will increase the vehicle owner’s policy premium with an at-fault accident. Insurance companies base your insurance rates on the likelihood of a future claim. Even though you weren’t the one driving, your agreement to loan the vehicle out to someone who then has an at-fault accident, makes you a higher risk to the car insurance carrier for doing so. This higher risk often translates into a higher car insurance premium.

Special car insurance policies

People that don't own a car but find themselves driving a lot should probably obtain a "non-owners policy." This assures them coverage in case the owner's insurance is inadequate. Some car insurance companies also offer "broad form" insurance that insures the driver and not the car. It should be noted that not every state allows this, and the policies are uncommon.

Additionally, if you’re a frequent borrower of the same car but not on the owner's policy, the owner's insurance company may see this as a misrepresentation or non-disclosure of the vehicles usage. They may claim that due to that, they’re not responsible for damages caused by the unregistered driver. So always be upfront with your auto insurance carrier about additional drivers.

Before you lend your car

As with so many other issues, the best advice is to speak with an auto insurance agent about your specific policy. Laws vary from state to state and every insurer is different. However, you don't have to feel like you can't ever lend out your car or borrow someone else's. Just make sure everyone involved is insured so you’re covered if an accident happens, because, well, accidents happen. And be sure your registration and car insurance policy card are in your glove box before they leave.

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Additional questions and answers regarding the loaning of cars to others

Q: Will I be covered if I borrow my parent’s car once a week without being on their insurance?

A: Depends on the state you live in, whether or not you live with your parents and your parent’s car insurance carrier. Most carriers will require your name to be added to the car insurance policy if you live with your parents. Some state require it as well. Do the research and make the correct decision based on what you find out. It would be terrible if you weren’t covered and the burden of all liability fell on your parents.

Q: Is it legal to drive a borrowed car without your own insurance?

A: Yes, it’s legal. Car insurance follows the car, not the driver. So, there’s no question of legality as long as the car you’re driving is insured. Be sure you know where the registration and car insurance card are, in case you’re pulled over for a ticket or experience an accident.

Q: If I receive a no insurance ticket in a borrowed car, will I have to show proof of insurance for two years even if I don’t own a car of my own?

A: This is a tricky situation. Car insurance follows the vehicle, not the driver. So, by borrowing an uninsured car, you’ve opened yourself up to illegality as the ticket will go on your license, not the owner’s. However, since you don’t own a car, there’s no need for your own insurance because you have nothing to ensure.

However, if you plan on borrowing other people’s cars a lot and those cars aren’t insured, we recommend speaking with an auto insurance agent. There are special circumstance policies available, such as the “non-owner” policy. They’re uncommon and not every state allows them, but it’s worth looking into if you find yourself needing to borrow uninsured cars.

Q: I borrowed a friend's car without permission, got into a one car accident (hit a tree). Can I use my insurance?

A: We recommend trying to use your car insurance to cover the damages. However, there’s a small chance they may not cover it, as you didn’t have permission to drive it from the vehicle’s owner. Depends on the state you live in and the details of your car insurance policy. In most states, the owner of the car isn’t liable if they didn’t provide permission for the use of their vehicle.

So, by borrowing the car without permission, you’ve opened yourself up to liability, a lawsuit and potential charge of being in possession of stolen property. Check with your car insurance carrier first, and if they deny your claim, then the costs for repairs will be coming straight out of your pocket. Better to pay now, if you can, rather than later as those costs may include lawyer’s fees. And those can be excessive.

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