Loaning Your Car? The Steps To Protect Yourself | The Baer Law Firm (2024)

When the car is in the shop, everyone dreads asking family members to borrow a vehicle or scrambling for rides to work or to pick up necessities. It is equally uncomfortable being put on the spot and asked to have your car borrowed. It may be a coworker who knows you are leaving town for the week and leaving your car behind, or your nephew who needs your SUV for “just one night”, or your roommate who wants to go to the store and cannot locate her keys. What should your answer be, and what risks are involved when lending out your vehicle? Is it even legal to loan your car to someone else?

Lending Your Vehicle: Insurance Coverage Protection

The biggest risk of course is that the person to whom you lent your vehicle will get into a wreck, causing damage to your car, hurting themselves, or worse potentially another person. While it is perfectly legal to loan your car to a friend or family member in need – provided the person has a valid driver’s license and is not impaired by alcohol or drugs – whether you are protected depends on the insurance coverage that you carry on the vehicle.

We previously blogged about the various different automobile coverages available. Please read the blog here and closely look at your Declaration Page (this is a 1-2 page summary) which lists the various coverages you have for each automobile. The BIG takeaway is there is no such thing as “FULL COVERAGE” – that is just a term insurers use to make you feel good about what you purchased. You need to closely look at the specific coverages you have.

If you do not have at least Collision and Rental Coverage on your vehicle, you could be without a car if the person you loan it to were to get in a wreck. (Of course – this would also be true if you got into a wreck which is why it is rarely a sound decision to not carry collision and rental coverage on your vehicle.)

Also, without Comprehensive Coverage you may not be covered if your car gets stolen or worse if the person who borrowed your car decides not to return it. For example, your friend borrows your car to go to a concert, and while they are enjoying the show, the car gets stolen. Or perhaps a terrible storm starts, and the forces of nature damage your vehicle. If you care anything about the car you possess, you need Collision, Comprehensive, and Rental Coverage.

Do I Have to Tell My Insurer that I Loaned My Vehicle for Coverage to Apply?

In most situations, the answer is No. Whatever coverages you have on your vehicle when you loan the car will apply even if you are not the driver. You do not have to affirmatively call your insurer and report that your friend is taking your car to run a quick errand.

However, in certain cases and for certain persons, coverage may be excluded, i.e., no coverage. Below lists some common (but not all) exclusions. If the person asking to borrow your car falls in any of the below categories, think twice before handing him or her the keys.

• Unlicensed Drivers – Most insurers exclude damage caused by individuals who do not have a valid driver’s license. If you are not sure, ask to see it despite how awkward you may feel by asking.

• Family Members Who Reside With You But Are Not Listed On The Policy – The most frequent borrowers of vehicles are family members with whom you reside. Thus, in calculating your premium, the insurer wants to know who the eligible driving age family members are in your household. In other words, if you live with your brother and he’s been in five wrecks in 12 months and has a half dozen speeding tickets, your insurer deserves to have this information in calculating your premium. You can decide whether or not to specifically exclude him. However, if the insurer does not know about the brother and your premium is just based on your good driving record, your insurer may deny the claim if it is your brother who causes the wreck. Thus, be very careful when lending your vehicle to family members, particularly those who live with you. Make sure they are actually listed on your policy before loaning your car.

• Excluded Drivers – For example, in the above scenario, if your brother is specifically excluded from coverage, do not let him borrow your car. Also, you may have excluded your teenage son or daughter from the policy in order to save money on car insurance. If that is the case, you will not be covered if your excluded son or daughter gets into a car wreck.

What Happens if the Person Who Borrowed Your Vehicle Gets in a Wreck?

How does the old saying go, “hope for the best but plan for the worst”? You’ve lent your car to a friend, coworker, family member, or other acquaintance, and they get into an accident. Suppose the person driving your car is at fault. What happens?

In Georgia, insurance follows the vehicle. So even though you weren’t driving or present for the accident, your insurance would be first in line to pay for damage caused to the other driver and his or her vehicle, provided the driver was not excluded. Provided you had collision coverage, your insurer would pay for damage to your car and provide you with a rental, assuming there was rental coverage as well.

Note: The insurance policy of the individual driving your car during the accident can be applied as secondary insurance if the damage exceeds your policy’s limit.

Are you legally responsible for damages in the event that there is insufficient coverage? In most scenarios, probably not. For you to be personally liable the injured party would have to show that you were negligent (i.e., did something a reasonable and prudent person would not do) in lending your keys to the at-fault driver. Reasonable and prudent people can be generous family members, neighbors, and friends. Simply letting someone borrow your car is not a negligent act.

However, it may be negligent to lend your keys to someone you suspect could be impaired by alcohol or drugs. It may also be negligent to lend your keys to someone who you believe may not have a valid driver’s license or who has a notoriously horrific driving history. Thus, if a person who you suspect should not be driving asks to borrow your car, you should say “No.” Not only may your insurance company deny the claim, but you could personally be liable for damages caused by the driver’s careless act and risk losing everything you have worked hard to save and protect.

Even if your insurer covers the cost of harm done, if the person borrowing your car gets into an accident, it could cause your insurance rates to rise.

The following factors influence accident insurance coverage:

• Whether the person driving your vehicle was or wasn’t at fault
• The types of coverage on your insurance policy
• The specific language of your policy
• Is the damage solely to your vehicle
• Was impaired driving a factor
• Where any traffic laws violated during the accident
• A claim for medical coverage and other compensation (pain and suffering) filed against your insurance

Before Lending Your Vehicle to Someone Else

Check your insurance coverage before lending your vehicle to anyone, and ensure you have appropriate coverages. If the person lives with you or is a family member, make sure they are not listed as an excluded driver on your policy. Also, make sure the person asking has current car insurance and a valid driver’s license. Making well-informed decisions based on facts and not assumptions will often lead to a more positive outcome.

However, if you do get into a situation where your vehicle was lent out and involved in an accident, an experienced car accident attorney can help. Or, if you simply want to better understand your existing coverage, The Baer Law Firm can help.

The Baer Law Firm has handled hundreds of car accident cases and knows how to navigate the insurance landscape so that victims obtain the results they deserve. We encourage you to contact our office or call us at 404.THE.BAER (404.843.2237).

By Bryan Baer | Posted on August 18, 2022