Lending Your Car to a Friend

If you both have auto insurance, your insurance will pay first and you'll be responsible for your deductible. Your auto insurance policy insures your vehicle plus you, any relative and anyone else using your car if the use is reasonably believed to be with your permission.

On the other hand, if your friend causes an accident that results in serious bodily injury and property damage to another person, the actual driver's policy will cover the bodily injury liability and the car owner's liability covers property damaged caused by his or her car. As owner of the car, your liability insurance also covers the cost of your legal fees in the event you are sued, but if your liability limits are exceeded, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage will not pay for damages beyond the limit for which you are insured.

Borrower has no Insurance
If you lend your car to a friend who does not have insurance, you are opening yourself up for trouble. If the damages your friend causes exceed your insurance policy limits, the injured party can come after you for medical and property damage expenses.

Borrows without Permission
What if your friend drives your car without your permission? You're not likely to be held responsible for the damages because your roommate borrowed your vehicle without your knowledge. In this case, your roommate's insurance will kick in first. If your roommate isn't covered, you will need to use your collision insurance to cover the damages to your vehicle and your liability coverage will cover damage to other's property. Unfortunately, the insurance company will assume your roommate HAS permission to use your car unless there are clear indications that you denied permission or there are extenuating circumstances, such as a drunken friend takes your car without your knowledge. In this case, the vehicle owner will still be responsible for all claims and damages.