At one time or another, nearly everyone borrows and lends a vehicle. Whether it’s for a quick trip up the road or a cross-country journey, understanding a little about insurance and borrowed cars can help reduce the risk of mis-information or costly mistakes.
Insured or Not Insured?
Most auto insurance is connected to the vehicle in question, so when someone borrows the car, insurance is usually in effect. However, it is always important to remember that some policies may contain additional riders that exclude drivers other than those specifically listed on the policies. If you are not sure whether or not coverage is in place, it is a good idea to contact your agent rather than risk it.
Other stipulations may also need to be met, including obtaining prior permission of the owner before driving the car and/or limitations of liability based upon the policy, driving history and insurance of the driver.
When the Worst Happens
Unfortunately, accidents have a tendency to happen in the worst situations. Call it Murphy’s law. Before borrowing or loaning out a vehicle it is a good idea to understand the consequences.
If an accident takes place when someone is driving a borrowed car, typically the owner’s insurance will kick in first. However, if the owner of the car is un-insured or under-insured your insurance will typically pick up the difference.
However, if the driver is uninsured or underinsured, and at fault for the accident, the personal assets of the owner could potentially be at risk.
Always verify the driver’s license and auto insurance policy is in place before allowing anyone to borrow your car – even for a short period of time, like test-driving a car that is for sale. It’s also a good idea to discuss co-payments or deductibles prior to loaning the vehicle in order to avoid potential problems should an accident or fender bender take place. Remember, an ounce of prevention is worth a pound of cure, especially when it comes to dealing with insurance-related issues.