Many drivers face the decision of whether to lend their vehicle to a family member, friend or neighbor who needs a set of wheels on a temporary basis. However, if the borrower doesn't own a car, he probably doesn't have car insurance, either. In this case, the vehicle owner's auto policy is likely to provide coverage if the borrower is involved in an accident.
Coverage Follows Vehicle
In most circumstances, auto insurance coverage follows the vehicle as opposed to the driver. Consequently, your insurance will cover a driver using your vehicle with your permission, even if the other driver has no insurance of his own. If the other driver has his own insurance, your policy would provide primary coverage while his policy would be secondary. The secondary coverage might apply in situations such as when the damage exceeds the limits on your policy.
Permission to drive can occur in other ways than verbally telling someone she can use your vehicle. Permissive use also exists when a member of your household uses your vehicle, even if you did not directly give your approval. However, it does not apply if the household member allows someone else to drive the vehicle without your permission. If you allow an individual outside your household to use the vehicle on a regular basis, it is considered to be permissive use.
In some cases, your auto coverage may not apply when an authorized borrower causes an accident. If the driver's negligence, such as driving while intoxicated, caused the accident, your insurer may have grounds to deny the coverage. If you knowingly allowed an unlicensed, intoxicated or incompetent person to use the vehicle, your insurer may also deny coverage for an ensuing accident. The laws of your state play a role in determining your degree of negligence in these situations and to what extent coverage applies.
Even when your insurance company provides coverage for an authorized borrower, you are the one who must deal with the ramifications. Even though you weren't driving, the claim is paid under your policy, so you are the one who experiences any applicable rate increase. In effect, you are allowing an uninsured individual to "borrow" your insurance as well as your vehicle, while only you pay the financial price if an accident occurs.