Your elderly neighbor needs to run a quick errand, so you lend him your car. He wrecks it. Now what?
What happens when someone else crashes your car depends on different factors, including whether you live in an at-fault or no-fault state, whether you gave the driver permission, and how the cars and drivers involved in the accident are insured.
Let’s review the financial responsibilities when someone who isn’t on your insurance policy crashes your car so you know precisely when you’re protected after handing over your keys.
Learn more: What to do after a car accident: Your step-by-step guide
In at-fault states, the driver who caused the accident is responsible for the resulting property damages and medical bills. Currently, 38 states have an at-fault system.
Check out our table: Do you live in an at-fault or no-fault state?
In practice, insurance companies — not drivers — cover car accident costs. The car’s insurance policy usually covers the at-fault driver, even if the driver doesn’t own that car. So, if your friend borrows your car and wrecks it, your policy normally accepts the claim.
If the person who borrowed your car didn’t cause the accident, then financial responsibility falls to the other driver involved. That driver’s insurance should pay for damages and injuries. If the at-fault driver has no insurance, then your policy might pay for repairs if you have uninsured motorist coverage.
Learn more: What happens if you don’t have car insurance?
Where things can get complicated is when the at-fault driver who borrowed your car was specifically excluded from your insurance policy or you didn’t provide permission to use your vehicle.
Your insurance carrier won’t accept the claim if the driver who caused the accident was excluded from your policy or didn’t get permission. Worse, you personally may be liable for letting the excluded driver use your car.
Insurance carriers will need to know if the other driver had permissive use or non-permissive use of your vehicle.
“Permissive use” means you let someone not on your policy drive your car. When you give permission and your policy includes permissive use coverage, your car insurance applies to the approved driver. In that case, your insurance carrier would accept a claim for the accident.
The borrowing driver’s insurance only gets involved if the cost of damages exceeds your policy limits.
Expert tip: Contact your insurance company and ask whether or not permissive use coverage is part of your policy. You’ll never know when a neighbor or friend may need to borrow your car in a pinch, and the last thing you’ll want to worry about is whether your car insurance is sufficient to do so.
Learn more: How much does car insurance increase after an accident?
Non-permissive use means the other person drove your car without your consent. Your insurance will not pay for accidents caused by someone who used your vehicle without permission. The borrowing driver will be liable.
In the 12 no-fault states, plus Washington D.C., drivers use their own insurance to pay for injuries — no matter who caused the accident. In no-fault states, it doesn’t matter if your friend who drove your car caused the accident. Generally, no-fault states require medical coverage, called personal injury protection (PIP), and property damage is covered by the at-fault driver’s liability insurance.
However, car insurance in no-fault states will not cover the accident on the following conditions:
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The driver is excluded from coverage on your policy
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The person who drove your car did so without permission
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The resulting damages exceed your policy limits.The borrowing driver’s insurance may pay the overrun.
Learn more: What is no-fault car insurance and how does it work?
There are 12 no-fault states:
1. Florida
2. Hawaii
3. Kansas
4. Kentucky
5. Massachusetts
6. Michigan
7. Minnesota
8. New Jersey
9. New York
10. North Dakota
11. Pennsylvania
12. Utah
Kentucky, New Jersey, and Pennsylvania drivers can opt for at-fault or no-fault insurance.
When you lend your car, you are also lending your auto insurance. Remember this when you hand your keys to someone else. Your insurance is usually the first to receive the bills for any accidents. This means you will pay the deductible and, potentially, higher insurance rates.
You can negotiate these costs with your friend later, but there’s no guarantee you’ll be successful.
Whose insurance pays for the damages if I drove someone else’s car and got into an accident?
Usually, the car owner’s insurance pays for damages when a driver borrows a car and gets in an accident. There are three main exceptions. The car owner’s insurance will not pay for damages if you are excluded from the owner’s policy, you didn’t get permission, or if you live in an at-fault state and someone else caused the accident.
What happens if a friend drives your car and hits someone else?
If you live in an at-fault state and a friend hits someone while driving your car, your insurance will probably pay the claim. If you live in a no-fault state, then the other driver should have personal injury protection insurance to cover the medical bills.
Does permissive use car insurance cover my friends and family?
Permissive use car insurance may cover your friends and family. Not all insurance policies include permissive use car insurance coverage. Check with your carrier to confirm.
Know that permissive use means you occasionally let an individual drive your car. If your brother uses your car weekly to run errands, your insurance company may deny a permissive use claim. In that situation, consider putting your brother on the policy as a covered driver before any accidents happen.
This article was edited by Tim Manni
