Have you ever loaned your car to a friend or family member?  What happens if they get in an accident while driving your car?  Whose insurance covers the cost?  I've seen it time and time again, particularly with teenagers and their friends.  Your teenage driver loans his/her car to friend to run an errand, etc and the friend has a wreck along the way.  Then you get the call from the injured parties attorney-"But my child wasn't driving" you say.  Unfortunately, you quickly find out that doesn't always matter. 

Since accidents can happen at any time, it's important to understand how your coverage works and ultimately who will cover accident-related costs. Here's what to know:  

1. Know your coverage.
First, it's important to know if the driver is covered by your insurance. Family members living in your household are typically covered by your insurance unless you expressly exclude them from your policy.

If a friend or a family member who is not living with you borrows your vehicle with your permission you will probably be held liable for the cost as the vehicle owner.  Depending on your policy, and whether or not the driver has insurance, you may or may not be liable.  Always check your policy- are there any exclusions for drivers not listed on your policy?  Are there any limitations in coverage for accidents involving unlisted drivers?  Be familiar with how your coverage works so you aren't stuck with surprise costs after an accident. 

2. Understand who pays.
Typically, the owner of the car is responsible for the accident, not the driver.  There's a common misconception that the driver's insurance will always cover an accident, but that's not always the case. Most times, car insurance follows the vehicle. However, exact coverage will depend upon the language in your policy.  This is why being familiar with the in's and out's of your policy is so important before you loan car.

There are exceptions, of course. If the accident wasn't your friend or family member's fault, the other driver will pay for the accident and your insurance should be unaffected. Or, if your vehicle is stolen and crashes, you will not be held liable for damages or injuries to others. However, damage to your own vehicle will most likely have to be covered by your insurance (collision).

3. Lend responsibly.
If there's a chance someone will regularly use your car, add them as a driver and include them on your policy. And, always make sure you are lending responsibly. You could be sued for damages- especially if you let an impaired or unlicensed driver operate your vehicle.

Good rule of thumb:  loan your car, loan your insurance.  The vehicle owner is usually held responsible for any accident that happens when you loan your car to someone.  In addition, if the accident is bad enough, you can be sued by the other party that was injured.  And parents, I suggest you make it a rule with your teenage driver not to allow their friends to drive their car.  Doing so, could cost you everything. 

There are many scenarios that can play out when someone borrows your car, which is why it's important to understand the terms of your coverage and be familiar with who is covered under your insurance policy. Talk with your agent if you have questions.  

This article is for informational and suggestion purposes only. If the policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies.

References:

-Grange Insurance Companies
- DMV.org
- Trusted Choice