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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're covered by your auto insurance when you loan your car to a friend or family member.

car accident and tow truck

Whether due to a breakdown, an errand, a designated driver, or a simple favor, it's not uncommon for one to drive a car that they don't own. Normally, everything goes well. 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.

General insurance rules on loaning cars

There are some basic guidelines and rules of thumb here; however, car insurance policies can be very 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're insured. 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.

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Specific examples when a loaned car is in an accident

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

Q: Will my 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 insurance carrier. This higher risk often translates into a higher car insurance premium.

Find out how to get the best car insurance rates if you've loaned your car to a friend or relative and they've had an accident.

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

A: When an at-fault accident occurs, the vehicle whose driver was at fault is covered by its own car insurance policy. If the policy doesn’t include collision coverage, then no such coverage is provided. 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?

First, you need to determine if the car’s insurance policy includes liability coverage, as well as collision coverage. Depending on the scale of the accident, the liability coverage on the car may not be enough to pay for all of the damages. If this is the case, and the driver has their own car 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 in excess of your coverage limits.

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

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

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's worth noting that not every state allows this, and these 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 car insurance carrier about additional drivers.

Before you lend your car

As with so many other issues, the best advice is to speak with an car 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 your registration and car insurance policy card are in your glove box before the other person takes off. Also, be sure everyone involved is insured so you’re covered if an accident happens--because, well, accidents happen.

And if you think you’re not properly insured, click here to connect with licensed insurance advisors and find out. You can probably save money on your car insurance while you’re at it.

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: It depends on the state you live in, whether or not you live with your parents and your parents’ insurer. Most carriers will require your name to be added to your parents’ insurance policy if you live at home. Some states require it as well. Do the research and make the appropriate decision based on what you find out.

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 are involved in 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 insure.

However, if you plan to borrow other people’s cars often and those cars aren’t insured, we recommend speaking with an car 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. It depends on the state you live in and the details of your 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 insurer 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 expensive.

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