This is a question that I’m asked quite often. “If I loan my car to someone, what happens if there’s an accident? Will my car be covered? Who’s responsible for the damage?”
When you loan your car to a friend or relative, first of all . . . make sure that person is insured. He or she needs to be a licensed, insured driver in order for you to be protected. This is called “permissive use” and it is allowed under most insurance policies. You are giving that other driver “permission” to use your vehicle on a temporary basis.
As long as nothing happens, you will be fine. But, if an accident occurs while the “permitted driver” is using your car, and the “permitted driver” is at fault, then the responsibility for that accident will come under your insurance policy. Your insurance policy will have to cover any costs related to the accident and you will be responsible for the amount of your deductible. This accident will count as a negligent claim on your record and could affect your future insurance rates.
If other people (outside of your car) are injured or other property (such another car or structure) is damaged, those costs will fall under the liability limits of your policy. If someone in the other car initiates a lawsuit, you could be held liable if judgments are awarded. And, if your car is damaged in the accident (and the “permitted driver” was at fault), the claim will come under your auto policy and you will be responsible to pay whatever deductible you have for collision damage.
So . . . the answer is . . . YES, YOU ARE COVERED if you loan your car to someone else, but keep in mind the risk you are taking.
It might be best to think twice before you do!