Understanding Your Auto Insurance Coverage

It’s happened to most of us at least once, if not on several occasions. A friend asks to borrow our vehicle for one reason or another.

Perhaps your friend’s vehicle is in the shop, or if you have a van or a truck, your friend asks to borrow your car to move.

As you agree to lend out your vehicle, in the back of your mind you’re thinking, “What if they get into an accident?” You wonder if you would be held financially responsible, or if your friend’s auto insurance policy would pick up the tab.

What if you were renting a car? Would the rental insurance cover the accident, or would your own auto insurance policy cover the damages?

In other words, is auto insurance tied to the vehicle or the driver? Continue reading as we explore both scenarios.

Does my insurance cover my friends?

When you purchase insurance, you are purchasing coverage on your vehicle. Contrary what the majority of what drivers think, your insurance follows the car not the driver. So, if you decide to lend your car to a friend for a day and they got into an accident, your insurance would be responsible for paying out the damage. Your friend’s insurance would only come into play if the damages exceeded policy limits.

If your friend does not have auto insurance of their own, and the damage was extensive and involved another vehicle or vehicles, then the parties involved in the accident could file a claim to recover damages from you for their medical bills and the damage to their vehicle.

Before you lend your car to a friend:

  • Check your insurance policy or contact your insurer to ask about the specifics of your coverage.
  • Check that your friend has a valid driver’s license.
  • Make sure your insurance and registration are in the car.

What if I rent a car?

In today’s digital world, renting a car is even easier than before. Services like Zipcar allow anyone to rent a car on the go—you don’t even need your own insurance! But what about the more traditional means of renting a car at the airport or other rental center? In this scenario, your personal auto insurance will apply; the auto insurance policy is tied to you as opposed to the vehicle. If you carry comprehensive and collision on your personal vehicle, it’s unlikely that you’ll need car rental insurance.

Though if you damage a rental car, it doesn’t mean you’re off the hook. Since the vehicle won’t be rentable, the rental car company could bill you for the money it lost while the vehicle was being repaired. Your auto insurance company may not cover this cost.

Before your rent a car:

  • Check with your insurer and verify what your current insurance policy covers.
  • Ask about any additional insurance the rental company might offer
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