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.
It’s your insurance policy that is responsible for your car when someone else driving it is involved in an accident. A common myth is that if your friend borrowing your car has insurance, then it’s your friend's insurance policy that covers any damages. Not true.
If your friend borrows your car and is at-fault for an accident it’s your insurance policy that is responsible for the at-fault damages. A rule of thumb to remember is ‘the car insurance follows the car’.
It’s also good to ensure whoever is driving your car has their own insurance policy. In the event the person you loaned your car to is involved in a serious at-fault accident that exceeds your insurance limits, their insurance policy will kick in to cover any additional liability they are responsible for.
Examples of When a Loaned Car is in an Accident
Here are answers to questions about what happens when someone not on your policy borrows your car and crashes it.
Will my insurance rates go up?
Most insurance companies will increase the car owner’s policy premium after an at-fault accident. Insurance companies base your insurance rates on the likelihood of a future claim.
Even though you weren’t driving, agreeing to loan the vehicle to someone who then crashes it makes you a higher risk. This higher risk often translates into a higher car insurance premium.
Which type of car insurance covers the vehicles involved in an accident?
When an 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 insurance won’t cover damages to the car. And, the vehicle’s deductible will apply. Both the vehicle owner and the at-fault driver will need to decide who pays the deductible. Regardless of who is responsible, the deductible must be paid.
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 and collision coverage. Depending on the scale of the accident, the car's liability coverage may not be enough to cover the damages. If this happens, and the driver has their own insurance, then their policy will pay for the rest – assuming they have enough coverage.
If the driver of your car is uninsured and causes an accident, you could be liable for everything. For example, what if the uninsured driver causes a multiple car pileup that exceeds the limits of your insurance policy? The injured parties could sue you for medical fees and property damages in excess of your coverage limits.
If the driver of my car gets a ticket, will it affect my car’s insurance policy?
Fortunately, 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. If the driver has car insurance and the incident is reported, their rates may go up because of the ticket.
Will I be covered if I borrow my parent’s car once a week without being on their insurance?
It depends on the state you live in, whether or not you live with your parents, and their 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. It can also depend on how many miles you drive per trip. Do the research and make the appropriate decision based on what you find out.
Is it legal to drive a borrowed car without your own insurance?
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. If you’re pulled over for a ticket or have an accident, you're going to need them both. Even outside of tickets and accidents, proof of registration and insurance are legal requirements.
I borrowed a car without insurance and received a no insurance ticket. Will I have to show proof of insurance for two years even if I don’t own a car?
This is a tricky situation. Car insurance follows the vehicle, not the driver. Borrowing an uninsured car has opened you up to illegality as the ticket will go on your license. It won't affect the owner’s license. And why should it? They weren't driving. 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, talk to an 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 frequently borrow cars.
I borrowed a friend's car without permission, got into a one car accident (hit a tree). Can I use my insurance?
We recommend trying to use your car insurance to cover the damages. However, there’s a small chance they won't cover it, as you didn’t have vehicle owner's permission to drive it. It depends on the state you live in and the details of your policy. In most states, a car's owner isn’t liable if they didn’t provide permission for the use of their vehicle.
So, by borrowing the car without permission, you may be in big trouble. You’ve opened yourself up to liability, a lawsuit and potential charge of being in possession of stolen property. Check with your insurer first. 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.
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.
And, if you borrow the car often but aren't on the owner's policy, the owner's insurance company may cry foul. They could see this as fraud or non-disclosure of the car's 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
The best advice is to speak with a 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 proof of insurance 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.
Finally, it’s always a good idea to assess your insurance policy. Do you have enough car insurance, or should you buy more coverage?
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