Published: May 2015
Your friend's car is in the shop, so you lend him yours to make his weekly grocery run. Soon after, you get a text from him saying he's been in an accident. He's insured, you think. His car insurance will be the one to cover the accident, right?
Not so fast. In most states, your policy will be considered the primary insurance in this scenario, according to the Insurance Information Institute. Typically that means your insurance company will likely be responsible for paying for the damage or the cost of any injuries to others that result from an accident your friend is at fault for causing.
So if the friend is at fault, the car owner's policy will be primary for the injuries and damages caused by the accident. The friend's policy will make up the difference, depending on the policy language. If you have optional collision coverage and your car is also damaged, you will need to make the claim and pay your deductible to have it fixed.
However, you can't just assume your insurance will cover the accident. Some companies have exceptions for relatives living in your household. Other companies may provide coverage, but on a more limited basis than if you were behind the wheel. Talk to your agent to understand your insurance coverage in this situation.
If your insurance company will cover your friend's accident, you may find that there are additional wrinkles. For instance, what if the accident is pretty major, and the cost of the claim maxes out the limits on your policy?
In that case, your friend's insurance policy may be tapped as secondary coverage to help close the gap, according to Claims Journal. So if your friend causes an accident that results in $35,000 in damage and your policy caps out at $30,000, your friend's policy might then be responsible for paying the difference ($5,000).
It's also possible that, even when your policy limits are high enough to cover a claim, your insurance company will typically still attempt to make your friend's insurance chip in. Your insurance provider might pay the entire accident claim, and then reach out to your friend's insurance company to recoup some of its costs. The particulars of exactly how this transpires is dependant on the specific policy language, coverages and state laws.
There may be additional variables that are specific to your insurance company, your policy, or the state you live in, so consider discussing your particular situation, and coverage with your agent to ensure you are properly protected.