How Car Insurance Works When You Loan Out Your Vehicle

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Having car insurance is a requirement in most states in this country, but does your car insurance offer coverage if you loan your car to a friend or family member? This is a question many people wonder about, and it's an important question to look into. Here are several things you should understand about your auto insurance coverage and how it works when you loan your car to other people.

Your Coverage Typically Applies To The Car

One of the biggest misconceptions people have with auto insurance is that it only offers coverage for the people listed on the policy. In other words, if you and your spouse are listed as drivers on the policy, you and your spouse would be the only ones covered if the car was involved in an accident.

Auto insurance is designed to cover a particular vehicle, and this is why your insurance company will want to know the make, model, and year of the car you are insuring. When you get the insurance, the cost is based on insuring that car only. Because of this, your car insurance should provide coverage for the vehicle no matter who is driving.

The Driver's Insurance May Also Kick In

The second thing to understand is that your car insurance will most likely kick in if someone else causes an accident while driving your vehicle; however, the coverage you have may not be enough. For example, if the accident causes damage that exceeds the limits of your policy, the insurance of the person that borrowed your car may then kick in and pay the remaining amount of damage. That is assuming the person you loaned your car to has auto insurance.

It's also important to know that if you did not have insurance on the car when you loaned it out, the insurance company of the person driving your car would most likely cover the damages caused to other parties involved in the accident.

If there is a situation in which neither you nor the driver of the car had insurance at the time of the accident, the party that was not at-fault may have to seek coverage from his or her own insurance company. This type of coverage is called uninsured motorist, and it is designed to protect people who are involved with parties that do not have car insurance.

Before you loan your car to anyone, you should make sure you have insurance, and you may also want to check with your insurance company just to make sure they will provide coverage for other drivers. It may also be important to ask the person you are loaning the car to if he or she has insurance, and as silly as it may sound, you should also make sure the person has a valid driver's license. Your insurance company may have a problem covering an accident if it was caused by a person that did not have a valid driver's license.

Your Rates Might Go Up

Finally, you should realize that if your insurance company has to pay a claim for an accident involving your vehicle, you will probably see a hike in your auto insurance rates. Even though you were not driving the car, your auto insurance policy will be affected if they have to pay a claim for your car.

Auto insurance is a necessity if you own a car or drive a car. If you currently do not have coverage or if you would like to find a more affordable or better policy, contact an insurance company, such as Gateway Insurance, today to request a quote for auto insurance. 

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28 March 2016