Updated: July 2016
Q: I'm planning to buy a car. Does my auto insurance protect me if I damage a dealer's or private individual's car while testing it out?
A: The short answer: Yes. If you're test driving a car with the intent to purchase it for your personal use, most insurers cover you for the use of "non-owned cars" (test-drive vehicles and loaners), explains Donn Sharer, an Allstate agency owner in Millstone Township, New Jersey.
However, dealers are required by law to insure their cars, and that insurance would typically cover an accident that occurs during a test drive, says Sharer. "It's a basic cost of doing business," he says. Keep in mind, though, that in some instances, a dealer's insurer may seek reimbursement from you or your insurer if you cause an accident during a test drive.
When you test-drive a privately owned vehicle, the same rules hold: The car owner's insurance typically covers damage to the car during your test drive, notes Sharer. In that case, you would be considered a "permissive driver" and generally wouldn't be on the hook for repairs. It's a good idea to confirm that the owner has an insurance policy on the vehicle before you take it for a test drive.
"In most states, insurance stays with the vehicle," Sharer says. "That means your auto insurance typically covers your car. When you drive someone else's car — one owned by a dealer or a private party who is selling it — their car is covered by their insurance."
Some car dealers may require you to sign a "loaner/demo" agreement before getting behind of the wheel of one of their vehicles, particularly if you'll be driving it for an extended time or without a salesperson present. If you sign the waiver, you may be accepting liability to pay for the cost of repairs if you are responsible for damage to the vehicle during a test drive. It's important to check with your agent before taking that car for a trial run — so you know whether your personal car insurance policy covers "non-owned cars," including test-drive vehicles and loaners.
One exception to coverage for test drives is if you're doing the test drive as part of your employment. Whether you're looking for a new company car or trying out a delivery van, personal auto policies typically do not provide coverage for an accident if the car-buying process was related to your work. Check with your employer to be see if their business vehicle insurance provides coverage for test drives.
Of course, one of the best ways to avoid involving any insurance company in your test-drive experience is to handle the vehicle with extreme care.
Sharer suggests keeping the basics in mind: Familiarize yourself with the car and its controls before putting your foot on the gas. Don't fiddle with the radio while you're moving. "And be sure to give other cars a lot of extra space — you may brake more or turn more widely in a test car than you would in your own vehicle," he says.