You can lend your car to your friend or any member of your family with ease. The insurance implications you will get are interesting because sometimes you might not have considered that a simple ride in your car by someone else can bring so many complications if your vehicle gets involved in an accident. Let’s consider what factors you should consider to safeguard your car’s safety while lending it to others. Some of these include:
1. Who Does Your Insurance Cover?
Most auto insurance policies follow the car, not the driver. This policy indicates that your car insurance is likely the primary coverage if someone else drives your vehicle. If they’re involved in an accident, your policy will typically cover the damages up to your limits.
However, some policies include exclusions for specific individuals or situations. For example, a driver not listed on your policy or someone ineligible under your coverage terms (such as someone living in your household but not explicitly named) might not be covered.
2. Verifying the Borrower’s Driving Record
It would be wise to ensure that the person borrowing your car has a valid driver’s license and a clean driving record. A person with a history of accidents, traffic violations, or driving under the influence could pose a higher risk. Check their confidence in handling your car, especially if it’s larger, smaller, or more complex and different than the vehicle they usually drive.
3. Reflect on the Purpose of the Loan
The purpose for which the borrower is using your car can also affect coverage. For example:
- Personal use: Most policies will cover someone borrowing your car for errands or personal reasons.
- Commercial use: If the borrower uses your car for business, such as food delivery or ridesharing, your insurance might not apply. For this purpose, you will require specialized commercial or rideshare coverage.
4. Check for Adequate Insurance Coverage
If your policy includes the borrower as a permissive driver, they should be protected. However, know that coverage is limited. Here are some limitations:
- Liability coverage: Your insurance will protect other people’s property or themselves from injuries caused by the borrower.
- Collision coverage: This covers damage to your car. However, you have to purchase it as an optional coverage. Over the past several years, there has been a high increase in the average value of collision insurance claims for physical car damage in the United States.
- Comprehensive coverage: This protects against non-collision damages like theft or natural disasters only if you’ve opted for it.
If your coverage is insufficient, the borrower’s insurance may act as secondary coverage, depending on state laws and individual policies.
5. Understand the Financial Risks
If the borrower causes an accident, your premium might go up regardless of their coverage under your insurance policy. Additionally, a claim filed against your insurance could lead to higher rates down the road.
You also need to consider that if the damages exceed your coverage, you may be responsible for paying the difference out-of-pocket. For example, when your liability coverage is $50,000, but the actual damages are $75,000, you could end up paying the remaining $25,000.
6. Post-Accident Protocol
In case of an unfortunate accident, you should be on the alert. The borrower should promptly notify you and report to the police and your insurance company. Collaborate to file a comprehensive report of the accident with photographs and witness statements to make a strong insurance claim.
Endnote
Lending your car out may appear to be a quick and straightforward favor; however, insurance repercussions arise in this case. It is possible to safeguard yourself against needless legal problems by understanding your policy, verifying who borrows your car first, and making suitable arrangements. This way, you can minimize risks for you as the lender and the person driving your vehicle.
