Lending your car: friendly helping hand or unjustified risk?

Insurance Insights | April 15, 2021

Lending your car: friendly helping hand or unjustified risk?

Lending your car to a friend or family member seems like no big deal, right? Just a friendly helping hand you willingly extend. However, you must also consider the risks involved. 

By lending your car, you are also lending your insurance coverage. Any accident that your friend has with your car will go on your record.

A Real-Life Case in Point

One of our customers experienced this situation. John went on vacation and lent his car to his friend Mark. Finding out about Mark’s accident, John was unsure if he should file a claim. As it turned out, Mark was found at fault because he was making a left turn (left-turning drivers are always found at fault because they don’t have right of way).

We contacted John’s insurer, but they were unable to open a claim because only the named insured can initiate claims. The insurer also informed us that the claim could be put under the driver, but that process would take time and was possible only once a claim is open.

Once John was in the know about all of this, he got an estimate for the repairs to his car. He determined it would be best for him to repair the car without filing a claim. In this situation, the claim would require him to pay his policy deductible as well as the balance of the repair cost. What’s more, a claim would increase his premium. It would remain on his record for six years and potentially increase his annual premium by up to $1000.

But what about accident forgiveness?

Can accident forgiveness protect you in this case? The trick with accident forgiveness is that it always follows the driver. For accident forgiveness to be triggered, you must first file a claim (which was unworkable for John). Plus, because he wasn’t the one involved in the accident, the forgiveness would not apply to him.

So what can you do to mitigate this risk?

No matter who was behind the wheel during an accident, claims will impact the one insured, who is most often the owner of the vehicle. The same applies to parents and their kids. It’s for this reason that we always recommend that our customers have separate policies from their kids. Doing so ensures that they are protected from claims for which they weren’t responsible.

For starters, consider holding off on lending your car and driving your friends and family. As much as we want to be there to help those we care about, we must also be aware of the potential pitfalls.

Give us a call today if you’re planning to lend your car so we can help you understand the implications and all your coverage.