Many people are concerned about lending their cars to friends. They should be. They could be liable. If someone drives your car, it’s important to know if you’re protected.
States’ laws and insurers’ rules vary; your agent can explain them as they apply to you. In the meantime here are some general rules of thumb concerning who’s covered by your policy when driving your car.
Permissive Use Drivers (PUD)
PUDs have permission to borrow your car occasionally. For example, if a friend borrows your car to run to the store, are you covered?
Yes, but note that in a PUD accident, you and the PUD could face lawsuits to cover remaining accident costs if your policy’s liability limits are exhausted and your PUD has no coverage of his own. If the PUD does have vehicle insurance, the not-at-fault party can make a claim on this policy.
Each state and insurer has different laws about household residents with drivers’ licenses who drive another household member’s vehicle.
Are your household members covered?
Maybe, depending on your state, insurer, and whether the household member is an excluded driver, nondriver, or driver on your policy.
If a household resident owns a vehicle and has his or her own insurance, he or she may be excluded from your policy; claims won’t be covered under your policy if this person has an accident while driving your vehicle.
If a household member classified as a nondriver has an accident driving your car, your claim would likely be covered. But nondrivers with licenses are rated on your policy as drivers, so if they have a bad driving record, this will impact your premiums.
If you don’t disclose household members, your insurer can deny claims and cancel your policy, and you could be sued and/or possibly charged with insurance fraud. When it comes to insurance, honesty is the way to the best policy.