Most people don’t give a second thought to loaning a family member or friend a car for something like a short errand, a weekend trip, or even a truck to be used to help a buddy move. While the generosity is all well intended, it can come at a terrible cost if something happens to the car or worse, if your family member or friend damages somebody else’s property or hurts someone else while he or she is driving your car.
While that friend or family member may have insurance on his or her own car, that doesn’t always kick in to protect you.
Inclusion and exclusion are matters of serious consideration you should address next time you get a car insurance quote for new coverage or if you’re about to renew coverage. As with many things, reading and understanding the fine print is vital to knowing and protecting against unforeseen expenses and adverse consequences that can easily be avoided ahead of time.
Remember, insurance (generally) follows the car
Most people make the assumption that car insurance is there to protect them as drivers. This is one of those assumptions that can generate many misunderstandings (and some unnecessary costs) down the road when an incident occurs requiring a claim to be filed.
With a few exceptions, insurance follows the car. Think about that, if you will. It’s one reason why the same driver can be quoted different rates for insurance when different makes and models of cars are plugged into the equation.
While who will be primarily driving the car can have an impact on what coverage levels and rates will or should be charged and included in a car insurance policy, keeping in mind that insurance follows the car will be important in determining if you need to take special steps to include or exclude certain drivers on a policy.
When you are putting a plan in place for car insurance coverage and you start to compare car insurance quotes, you may want to familiarize yourself with these terms:
- Permissive use – if you read your car insurance policy carefully, you may find in it a provision referred to as the Omnibus Clause. In that clause it may spell out how your car insurance will cover any driver, any family member who lives with you, and even any of your dependent children away at school, so long as they have your permission to drive your vehicle. In some states, permissive use drivers will have reduced coverage levels that apply when they are operating your vehicle (unless you make specific provisions to increase that coverage.)
- Non-permissive use – your policy may also spell out terms and conditions covering incidents where your car is used without your permission or knowledge. If your car’s taken without your consent, you generally won’t be held accountable for any damages. For instance, if a thief takes your car for a joyride and crashes it into a parked, brand new BMW M6 convertible, you won’t be liable for any damage to the BMW. (In this incident, you will most likely have to rely on your insurance to cover any damages to your vehicle.) If a friend of yours borrows your car without your permission and causes an accident, your friend’s insurance will probably be considered primary coverage and yours secondary. (If, in this instance, your friend doesn’t have insurance, you’re probably out of luck, as most circumstances will dictate that your car insurance will be tapped to cover any damages or expenses stemming from the accident.)
One thing to note: unless it’s clear that you have expressly and specifically denied permission for use of your car, most car insurance companies will just assume that any friend, visiting relative, or family member residing with you has your permission to drive your vehicle.
If any of those folks were to cause an accident, there’s a good chance you will still be liable for damages, even if you didn’t personally hand them the keys or directly give them permission to drive your car.
Your car insurance company may ask you to exclude certain drivers — friends or even family members (even a spouse) with numerous accidents or DUIs — from your policy to protect it from added risk. You can also decide for yourself to exclude a family member (such as a young teenage driver or a spouse/partner with a less-than-stellar driving record and his or her own insurance) to save on your premium. If you do, there are a few things you should know.
If an excluded driver takes your vehicle for a spin (with or without your permission) your car insurance will probably not cover any accidents that occur. Though state laws differ, the following generally applies:
If an excluded driver borrows the car with your permission (even if it’s for a one-time event or even a short trip) and an accident happens, both you and the driver will be personally responsible for any damages caused.
If an excluded driver takes off with your wheels without your permission and gets into an accident (depending on your state’s laws) you generally won’t be held liable if an incident occurs (especially if the excluded driver has his/her own car insurance coverage.)
If you live in a no-fault state, you may not be responsible for expenses related to any personal injury an excluded driver causes in an accident, but you and the excluded driver may still be responsible for personal liability. That is, if the injured party’s insurance limits have already been reached to cover the accident, he or she could take both you and the excluded driver to court to recover any remaining expenses.
There are currently a few states that don’t allow you to exclude drivers on your car insurance coverage. Those states are:
- New York
If you don’t live and drive in one of these states, it may depend on the insurance company you have whether or not you may exclude specific drivers from your car insurance coverage.
It’s one reason why you should always read the fine print of your policy or better yet, sit down with your agent and get all your questions answered and be clear on where your coverage and responsibility begins and ends with your specific car insurance coverage.
Jeffrey Davidson is a writer and editor with more than 25 years of experience working with insurance companies and insurance-related publications. He currently writes about auto insurance products and issues for Reply!. You can find his article on more questions and details to be aware of with car insurance coverage.