Do you lend your car to friends, family or strangers? If so, be aware that you’re also lending those other drivers your car insurance.
An accident by your driver could result in an increase in your insurance premiums. Your car could be damaged, temporarily unusable until repaired or it could be totaled. You will get the cash value of a used vehicle—minus your deductible, and less any balance due on your car loan if you have one.
That was the good news! Most significantly, a ton or two of a vehicle can cause a lot of damage to people, other vehicles and property. You will likely be held financially responsible simply because you own the car. (This is another reason why YOU should have an Excess Liability or Umbrella Policy.)
Here is an analysis of five typical car-sharing scenarios:
1. Occasionally lending to a friend or neighbor. In general, car insurance covers you and your car when your friend borrows the vehicle from time to time or in an emergency. You should make sure the borrower is properly licensed and doesn’t have big negatives such as DUI or speeding tickets on his or her driving record. It is best if your friend has their own car insurance so their carrier can provide some liability coverage.
2. Regular lending to a friend, roommate, or significant other. If you’re sharing your vehicle all the time, your insurance will cover you, as with occasional borrowers, but you should notify your insurer and list the other driver on your policy. If this regular driver is not listed as a named insured and they loan the car to another driver there likely is no coverage on the car!
3. Use by a house guest. This is a great way for your out-of-town guests to save money by avoiding a rental car. Same rules apply as No. 2 above.
4. Teenagers. As soon as your son or daughter gets a learner’s permit or license and climbs behind the wheel you need to list them on your policy so your insurer can properly price your new increased risk. Expect your premium to increase by 50 to 100 percent and for good reason.
5. Renting to strangers through a car-sharing app. Your personal insurance policy typically provides no coverage when you rent out your vehicle through car-sharing services. These companies provide some insurance but it has limits. Be sure you fully understand all the details of that insurance before you rent out your car.
The bottom line is that there is a significant financial risk when you lend your car to anyone. Be selective with whom you trust!
Contact us if you have questions. We are here to help!