Is the Car Insured or the Driver?

Say your car breaks down. Say you don’t have the proper insurance coverage that pays for a rental while it is getting repaired. Say a friend has an older vehicle sitting around that he never uses. It has insurance on it, though, and he offers it to you to drive until you get your own car back. Say you drive it for a couple of days with no problem. Say that one day as you’re cruising home from work, not paying attention, you rear-end someone else who was sitting in traffic. Whose insurance is on the line, yours or your friend’s?

It depends on a lot of different factors…

Before we go any further, understand that what happens in this situation changes based on so many variables, it is not possible to give a single, pat, answer. The laws of your state will affect the answer, the policy of the insurance companies involved will affect the answer, your status as a driver will affect the answer, and what car you’re driving and why will also affect the answer. Plenty of variables here, so the closest you can get to a solid answer is ‘both’…or perhaps ‘neither’. Sorry to be so imprecise but when you are dealing with multi-billion dollar insurance companies and state law, they don’t have an army of lawyers punching out hundreds of pages of fine print for no reason.

So, in a most non-specific, GENERALIZED manner, that may be changed based on any number of things in your life, usually it is the car that is insured and not so much the driver. We’ll get more into some of these variances that can change this reality a bit later, but for now, see the common sense in why this is so:

• Comprehensive Insurance: is in place with the rates set as they are because basically its duty is to repair your car after an accident, or if it is damaged by a flood, or fire, or stolen, or whatever. The premiums are set based on how much it would take TO REPAIR A SPECIFIC CAR. So this insurance would not logically follow you, what if you have comprehensive on a Yugo (very cheap), and drive your friend’s Ferrari? You expect the insurance company to suddenly pony up and fix that thing after an accident? Not likely.
• Liability Insurance: A little money used to repair damage to the car you are involved in an accident with as well as the people inside it. The premiums for this insurance are going to be set largely based on a car’s safety features, and its ability to do massive damage to another car. For example, a Hummer is capable of flattening many cars out there today, doing extensive damage. Your Yugo, on the other hand, can barely knock down a bicycle, therefore its liability insurance premiums are going to be less because you are less likely to seriously injure or kill someone in an accident. So liability insurance is largely auto-based and functions no matter who is driving (with certain exceptions listed below).

Rules, Rules, Rules…

So GENERALLY, it’s the car that’s covered and not the driver, but of course there’s exceptions to every rule - usually one or two exceptions, but in this case, when we’re dealing with lawyers and multi billion dollar insurance companies and governments, there are a whole lot of exceptions, far too many to list here, so these are some of the basics. The most important thing to remember if you ever have to drive a car that is not your own; check with your policy first and if necessary check with your insurance agent.

• Are you driving with permission?: It matters in a big way, because a stolen car (or one taken for a joyride) that gets into an accident may not be covered by an insurance company. Generally speaking the insurance companies are fine with you letting a licensed, legal driver take your car for a spin and will provide coverage as long as they have your permission to use the vehicle. Be careful, though, if you are loaning your car to someone for a long period of time, you will want to notify your insurance company of this, because if they get into an accident two months down the line and your insurer finds out they’ve been driving that car all that time, they may pitch a fit and refuse to pay.
• Is it a rental?: If you are renting a vehicle and have comprehensive coverage on your own car, you are probably covered for the rental. One thing you should do is apply some logic before deciding to forego that insurance offered by the rental company, though: What’s your deductible for comprehensive? Does that $500 really compare to the $30 or $40 insurance policy with zero deductible? Keep track of your risks and drive safely.
• Are you legally allowed to drive?: Some people try to take advantage of their insurance company by allowing someone who does not have, or cannot get insurance to drive their insured car. This can be a big mistake if an accident occurs. Once the insurance company finds out about your driver, the gig may be up and no payment forthcoming.
• Have you violated any exceptions on the policy?: Some insurance companies won’t insure a teen driver no matter what. Others will not provide coverage for drivers between 16 and 25 years old. If this is true, it will be spelled out explicitly in your policy. If you had the keys of your car to someone who meets these exceptions, you will be denied payment.
• What state is this again?: Again, the rules and laws vary from state to state, insurance company to insurance company so check your policy thoroughly before you take any risks.