Car insurance and borrowed vehicles could mean trouble

Every now and again, for whatever reason, it becomes necessary to either drive the car of a friend or relative or lend your car to one. Generally, that’s OK; your insurance policy usually permits this. Furthermore, nothing unusual will happen the vast majority of the time. The errand or errands will be run and the car will be returned safely and no one is affected either way.

What happens when something does go wrong? Sometimes, despite the best efforts of the parties involved, a borrowed vehicle ends up in an accident. What happens then? Whose car insurance will cover the problem?

As always, there is no clear-cut answer to that question. It all involves a number of different factors - your insurance company, your state laws, who is at fault, whether or not the driver has insurance and whether or not the car was used with permission of the owner.

Generally, the owner of the vehicle is not held responsible if the car is used without permission. This would also apply if the vehicle was stolen and then wrecked.

If the vehicle was used with permission, but the driver did not have his or her own insurance, the owner of the vehicle can be held liable. The owner’s insurance would generally cover any damage or bodily injury caused in the accident. If the borrower was at fault and the damage exceeded the amount of the owner’s insurance, the owner’s personal assets could be at risk. It goes without saying that lending your car to a driver who does not have his or her own auto insurance policy is a very bad idea.

If the owner and the borrower have coverage and the accident involves damage to both vehicles and bodily injury to both vehicles’ occupants, the liability will be split between the companies of the borrower and the driver. The policy of the driver will cover bodily injury, while the policy of the owner will cover damage. As above, should that damage exceed the limits of the owner’s policy, he or she could be held personally liable.

If your vehicle is in an accident in another state that has higher minimum liability insurance requirements than those in your state, and you have only your own state’s minimum insurance coverage, your coverage will automatically increase to the other state’s minimum. This is a rare case of something working in the favor of the policy holder, rather than the company.

The bottom line is this - While there is generally not a problem when you lend a vehicle to another person, there can be serious financial and legal ramifications if that person is involved in an accident while driving your vehicle. If you anticipate letting someone borrow your vehicle, you might wish to contact your agent in order to ask them specific questions regarding your own liability should an accident occur. And under no circumstances should you lend your vehicle to another individual who has no coverage of their own. That would be taking on an unacceptable risk that could potentially cost you everything you own. You don’t want that.

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