Loaning Your Vehicle Could Be Insurance Risk
Most of us have loaned our cars to friends or relatives at one time or another. For the occasional run to the store or the drive to and from work, we typically don’t think it’s too big a deal. But that’s not necessarily the case. The laws in most US states make car owners liable to some degree for the actions of anyone to whom they loan their vehicle — even if that person has his own vehicle and insurance policy!
For just a moment, consider the possibility of loaning your car to your brother who is visiting for a couple of weeks. Assuming he has his own car insurance policy you figure it will cover him completely if he’s in a crash. Then let’s assume your brother has an accident and you find out he only has a cheap car insurance policy that covers minimum liability amounts in his state.
If your brother is sued by the other parties to the crash the award a court gives them might exceed his liability limits. Guess who the court will go after next? You. As the legal owner of the car you are responsible for the actions of your brother even though he’s an adult with his own insurance policy. Your insurance will have to make up for what his does not cover. If neither of you have enough liability coverage you’ll be paying for it out of your pocket.
Furthermore, your brother’s cheap car insurance isn’t going to pay to repair or replace your vehicle. That will be the responsibility of your insurance company through the collision and comprehensive coverage you purchased. And that’s assuming your insurance company will agree to pay for it. If they do, your rates are sure to go up.
Your Three Options
If you’re concerned about loaning your vehicle to others for extended amounts of time you have three options to protect yourself. Which one is right for you depend on your circumstances.
Option 1 – Require the borrower to increase his own liability limits. If the person borrowing your car will be doing so for a significant length of time you’d be wise to require the driver to increase his own liability limits to at least $100,000 per accident. This may seem excessive, but it’s really not. Even $100,000 is a drop in the bucket when compared to a multi-million dollar award.
Option 2 – Require the borrower to purchase temporary insurance. If the person you’re a loaning your car to doesn’t own a vehicle with his own car insurance policy, you should definitely require him to purchase temporary car insurance while he’s borrowing yours. You can find affordable car insurance in 30, 60, 90, and 180 day increments. Any temporary insurance your friend or relative purchases should have liability limits of no less than $100,000.
Option 3 – Purchase your own umbrella policy. Purchasing umbrella insurance is a good way to cover yourself against a whole host of unforeseen events. It’s called “umbrella” insurance because it covers all of those things not dealt with by your other insurances such as your auto, home, and life policies. Umbrella insurance is always a good idea anyway, if you have high value personal assets, but even more so if you’re loaning your vehicle to friends and relatives.
Whether you take any action to protect yourself when loaning your vehicle or not is a matter of personal preference. Each driver needs to measure his own risk and his comfort level with that risk. Those who are concerned certainly have enough options to cover themselves.