You tried to be the nice guy (or girl). Bad idea.
Your neighbor needed a car but didn't have one, so you let him borrow yours. Next thing you know, you hear screeching brakes and a mammoth crash. And when you look outside to check out what's going on, all you see is your rear bumper sticking out of the first floor condo next door. OK, that scenario may be a little extreme, but if you do lend your cherry-colored F150 to the neighbor and he or she wrecks it, are you covered?
Car Insurance Coverage: The General Rule
The answer is usually yes. The majority of standard insurance policies cover any incidents involving the insured vehicle, no matter the driver, as long as you voluntarily allowed the driver to use your car. The general rule is: insurance travels with the car.
Therefore, if your neighbor only borrowed your car very occasionally before slamming it into someone else's condo, your insurance company would cover the damages according to the terms of your insurance policy. Just as if you had done the dirty deed yourself.
Exceptions to the General Rule
However, there are exceptions to this general rule. The insurance industry handles these exceptions by writing exclusions into policies. Some insurance policies, for example, specifically exclude others household members from driving your vehicle, such as roommates. Others exclude drivers under 25.
Exclusions are especially common with discount policies. In fact, sometimes the exact reason that you are getting a discount is because you are excluding pretty much everyone other than you from driving your vehicle. In that case, don't let your neighbor anywhere near your car keys.
Needless to say--but it's worth saying anyway--if your neighbor does not have a valid driver's license and you let him or her borrow your car, the general rule will not cover you.
Break Out Those Insurance Papers--Ahead of Time
The safest way to go, then, is to not let your neighbor borrow the car in the first place. But if you have accepted that you are the nice guy (or girl) and that's never going to change, at least do yourself the favor of confirming that your policy will follow the general rule, rather than the exceptions to it.
Take out your insurance policy and look through it for exclusions. Or call your agent. Make sure that your neighbor is not specifically excluded. That way, you can be the nice guy (or girl) while protecting yourself.
A Beautiful Day in the Neighborhood
The reason you buy insurance is because someday you might need it. When your neighbor crashes your car into a condo, that day has officially arrived. By scouring your auto insurance policy for exclusions and making sure letting your neighbor drive isn't one of them, that day can be a little less disastrous.
Although, admittedly, still quite problematic.
Andrew Freiburghouse is a writer and businessman. As a partner at Los Angeles tax preparation firm Pronto Income Tax of California, Inc., Andrew has served thousands of clients both face to face and over the telephone. Currently, Andrew lives in Brooklyn, NY.
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