At one time or another you have probably handed your car keys over to someone to drive your car. Whether your friend needed to run an errand while his car was in the shop or a relative had an emergency situation and asked to take your car for the day, you freely handed over the keys, but is that always a good idea? Loaning your car to a friend or relative is a kind gesture, but what happens when that person has an auto accident?
Understand Your Coverage Before Loaning Your Car
Your friend asks if she can use your car for a few days until her car is repaired and you gladly agree. The first day your friend is going to work she is involved in an auto accident, but you aren’t too concerned because she is the one who caused the accident. Her insurance will cover the damages, right?
Wrong! In private passenger auto insurance, the coverage typically follows the car and not the driver and this is where the problem lies. Many people assume that insurance follows the negligent operator of the car, but in knowing the facts about your auto insurance coverage, you may think twice before lending your car to anyone.
Who is Covered While Driving My Car?
Now that you understand that insurance follows the car and not the driver, you may need clarification as to who may be covered as an “insured driver” under your N.C. auto insurance policy. Keep in mind that just because someone is considered an “insured driver” does not mean that loaning your car is risk-free.
Below are the most typical situations of insured drivers:
A driver(s) with permissive use- Permissive use can be broken down into “implied” or “expressed” and can sometimes be difficult to categorize. As long as you give someone permission to drive your car, coverage will generally apply; however, anyone driving your car without permission has no coverage.
A driver(s) living in the household who is a relative- If someone is a family member living in your home, they are considered an insured driver.
A driver who is a spouse/domestic partner- Most N.C. auto insurance policies provide coverage for the insured, relatives in the household, and spouse/domestic partner. *Someone simply living with you (and not a relative) is NOT considered a named insured under your N.C. auto insurance policy.
If any of these people that are considered “insured drivers” regularly use your auto(s) listed on your auto insurance policy, it is recommended you notify your local N.C. independent insurance agent.
Most people, when loaning their car, don’t consider the potential scenarios that may happen that could negatively impact their financial situation. For example, have you considered the following “what-if” scenarios?
- Your friend has permissive use to drive your car and causes an accident involving property damage and bodily injury. As a result, your insurance premium has increased because you are no longer eligible for a claims-free discount.
- Your neighbor asks to use your car to pick up their sick child. On route, he runs a red light at a major intersection and causes a catastrophic accident that involves a fatality. Now, there is a pending lawsuit and your limits of liability have been exhausted. As a result, YOUR assets are now vulnerable and you are responsible for anything above and beyond your N.C. auto limits of liability.
- You lend your car to your friend and she allows another person to drive the car without your knowing. If that person is involved in an auto accident, will there be coverage? This is where it can get complicated and the grey area of “permissive use” comes into play.
Paramount Insurance Agency is here to assist you with any questions you may have regarding “insured drivers”, permissive use, or anything relating to your coverage under your N.C. auto insurance policy. Call us TODAY at 866-869-3335.