Lending your car to someone? What if they wreck it?
Oct 17, 2024, 8:00 PM
The consequences for lending your car to someone who then gets into an accident depend on whether your insurance company has a permissive use clause. (Canva)
(Canva)
SALT LAKE CITY — Have you ever lent your car to someone, whether it’s your friend or your child, and wondered what the consequences would be if they got into an accident? Who would pay, the lender or the borrower?
Sophia Zeller, a college student at Kalamazoo College in Michigan, joined Dave & Dujanovic to share her experience.
Zeller lives in a house with six roommates, and not all of them own a car. She said there have been several times when they would ask to borrow her car to run errands.
“We don’t have a laundry machine in our house, so they often ask to borrow it to … bring their laundry down to the laundry room.”
She said she’s usually okay with lending her car for that since the laundry room is just a couple hundred feet down the road. However, she draws the line if they want to drive farther. And she said insurance plays a big role in that decision.
A few years ago, Zeller’s friend got into a rear-end collision with her car. To prevent her insurance from going up, the friends decided to take care of the repair on their own dimes.
Permissive vs. non-permissive use
The consequences for lending your car to someone who then gets into an accident depend on whether your insurance company has a permissive use clause.
“Permissive use basically means that your insurance company will extend coverage that you and the drivers on your policy have to any other driver that you give occasional permission to borrow the car,” explained Bankrate Analyst Shannon Martin.
If your insurance company does not have this clause, anyone who’s not listed on your policy does not receive coverage.
The other thing to think about is whether the borrower has his or her own insurance.
“If the friend has their own insurance policy or is listed on their mom or dad’s policy, what would happen is your [insurance] company would pay for the accident. [They would then] subrogate to the driver’s insurance policy and get reimbursed,” Martin said.
“So your policy probably will not see a sharp increase, but you might lose some incident-free discounts.”
On the flip side, if the borrower does not have insurance, the car owner could face much worse consequences.
“The owner of the vehicle is really responsible for what happens to the vehicle. So from the insurance company’s perspective, every time you loan your keys to a friend, [you should know] who that friend is, what they’re driving record is, what they’re going to do with your car.”
