Accident in a Borrowed Car: Who is Liable?

When you hand someone the keys to your car, you’re handing over your car insurance coverage, too. If the person borrowing your vehicle causes an accident in your car, it is your insurance that pays — and your rates that rise in response.

Should the damages from the accident exceed your insurance limits, the borrower’s policy will kick in. However, if he or she doesn’t have a policy, then you as car owner are on the hook for the damages that insurance doesn’t cover.

Clearly, your finances are at risk if you let the wrong person drive your car.

Who is covered?
The drivers listed on your policy are always covered with no restrictions. And typically anyone driving your vehicle with permission is covered, but some insurers put restrictions on coverage of drivers not listed on the policy, like drop-down coverage limits, double deductibles, or not covering physical damage to your vehicle.

Some very cheap insurance policies restrict coverage to the named driver only. In those cases, there is no such thing as a permissive user, and  you would not be covered if a friend drove the car and wrecked it. In fact, you would be personally liable for all the damage inflicted by your car as well.

To make sure you are covered, add friends or family members who are living with you or driving your vehicle on a regular basis to your auto insurance policy.