If Your Friend Borrows your Car and Causes an Accident, Who Pays What?

AAA Mid States

If you both have auto insurance, your insurance will pay first and you'll be responsible for your deductible. Your auto insurance policy insures your vehicle plus you, any relative and anyone else using your car if the use is reasonably believed to be with your permission.

On the other hand, if your friend causes an accident that results in serious bodily injury and property damage to another person, the actual driver's policy will cover the bodily injury liability and the car owner's liability covers property damaged caused by his or her car. As owner of the car, your liability insurance also covers the cost of your legal fees in the event you are sued, but if your liability limits are exceeded, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage will not pay for damages beyond the limit for which you are insured.

Borrower has no Insurance

If you lend your car to a friend who does not have insurance, you are opening yourself up for trouble. If the damages your friend causes exceed your insurance policy limits, the injured party can come after you for medical and property damage expenses.

Borrows without Permission

What if your friend drives your car without your permission? You're not likely to be held responsible for the damages because your roommate borrowed your vehicle without your knowledge. In this case, your roommate's insurance will kick in first. If your roommate isn't covered, you will need to use your collision insurance to cover the damages to your vehicle and your liability coverage will cover damage to other's property. Unfortunately, the insurance company will assume your roommate HAS permission to use your car unless there are clear indications that you denied permission or there are extenuating circumstances, such as a drunken friend takes your car without your knowledge.  In this case, the vehicle owner will still be responsible for all claims and damages.

Access to the Keys

Let your agent know about any and all licensed drivers in the household to include your roommates as they should be listed on your policy as an additional driver.  You and your agent will need to review your policy to make sure you are provided with adequate coverage.

How about regular borrowers?  Anyone who has been given permission to use the vehicle on a regular basis (more than 2-3 times per week) for an extended period of time should also be listed on your policy.

Stolen Vehicles

If your car is stolen and then involved in an accident, you will not be held responsible for damages done to other people and their property, but you will probably have to use your collision insurance to pay for the damage to your car. In the unlikely event the thief has auto insurance; his company will not pay for his criminal act.

Borrows the Car and Causes Physical Damage to the Vehicle

What if the borrower hits a deer and causes physical damage to the vehicle?  The vehicle owner will have to file the claim and will be responsible for the deductible and any expenses incurred.  The borrower's policy will be the secondary policy, but it will be up to the vehicle owner to recoup the deductible from your friend. 

Regardless of the scenario, it is wise to understand your insurance policy and exactly what it covers and when. It is very important to exercise common sense when loaning your car to roommates, friends and relatives. Your local agent can help answer any questions about your policy before you decide whether lending your car makes sense for you.