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You let your friend borrow your car when the (almost) unthinkable happens—they cause a car accident. Not only could this wreck your friendship, but it might also put a dent in your wallet in the form of higher car insurance premiums.
So who pays when your friend crashes your car? If it was their fault, the burden usually shifts to you and your car insurance. It might seem unfair, but this is generally the way auto insurance works. Auto insurance typically follows the vehicle rather than the driver.
Therefore, if a friend borrows your ride, your auto insurance—not your friend’s auto insurance—normally is the primary coverage for any incident involving your car.
How a Your Insurance Would Pay Out
Let’s say your friend is responsible for a wreck that causes $7,500 in damage to your car. In this situation, collision coverage (if you have it) likely would cover the repair bill for your car (minus the deductible). Meanwhile, your liability coverage would take care of fixing damage to other people’s property (such as others’ vehicles) and pay medical bills for others’ injuries.
Your friend’s auto insurance policy generally won’t be in effect when they’re driving somebody else’s car. However, your friend’s policy could be secondary coverage if you’ve maxed out the dollar limits on your policy to pay for damage and injuries stemming from the wreck.
For example, if the wreck with your friend behind the wheel leads to $15,000 in damage to another motorist’s car but the liability portion of your policy limits coverage of property damage to $10,000, your friend’s policy might be tapped to fill the $5,000 void.
Exceptions Affecting Coverage
But when it comes to auto insurance, there are often exceptions—exceptions that might affect coverage of your friend’s crash. For example, some auto insurance policies exclude other drivers, including relatives who live with you, unless a policy lists these drivers by name. This extremely cheap coverage is sold by sub-standard insurers. Insurers with a solid reputation don’t limit coverage to just the primary driver or any other drivers listed on the policy.
One bit of good news: If your friend didn’t cause the crash, financial responsibility for damage and injuries may shift to the driver who’s responsible. (But in no-fault insurance states, most injury claims are made on your own personal injury protection coverage.)
Now, what if your friend borrowed your car without getting your permission (called non-permissive use)? Your own auto insurance generally covers only people who drive your car with your permission. In these cases, your friend’s insurance coverage would be the primary coverage if the friend crashes your car. And what if your friend doesn’t carry any auto insurance? Then you might have to lean on your own coverage to pay for damage or injuries.
Things could get stickier if your friend isn’t exactly the best driver. Let’s say you allowed your friend to borrow your car, even though you were aware they were too tipsy or had piled up several traffic tickets. In this instance, you might be held responsible for damage or injuries caused by your friend.
Dents to Your Insurance Record
How will all of this affect your auto insurance premium? Despite the fact that your friend was driving your car—and you weren’t anywhere near the car—your insurance rates could go up at renewal time because you’ve had the claim on the policy.
The lesson in all of this: Just as it’s wise to carefully pick your friends, it’s wise to carefully pick the friends who you let borrow your car.