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How Does Auto Insurance Coverage Work When You Borrow Or Loan A Car?

If you ever need to borrow a car from someone or loan your car to another person, have you wondered how auto insurance coverage works? Auto insurance is important to have at all times for anyone who drives, and here are several things to know if you ever decide to borrow someone's car or loan your own out to a friend. 

The basic principle

The basic principle of car insurance is that if you insure your car, it is insured no matter who drives it, unless you have a specific person stated on your policy that is excluded from coverage. This means that if you loan your car to a friend, your car insurance will cover a claim if your friend has an accident while driving. Your insurance coverage will provide the same coverage if your friend was driving the car as it would if you were driving the car.

The same principle is true if you borrow a friend's car. That friend's car insurance coverage would protect you and the car if you were borrowing the car and wrecked it. This is the basic way auto insurance coverage works; however, there are a couple other key things you should know.

The coverage may not work if the driver meets certain conditions

The second thing to understand is that it is very important for you to be selective with who you loan a car to. If you have a friend who is a high-risk driver or that recently had a DUI, you should not loan out your car to him or her. Additionally, you should make sure you do not loan your vehicle to anyone who does not currently have a valid driver's license. It is your responsibility to make sure you limit who drives your car, as your car insurance company could deny a claim caused by a person who is a high-risk driver, even though you have insurance coverage.

You should add the driver to the policy if he or she frequently uses the car

The other important thing to know is that if you loan your car to someone on a regular basis, you should add his or her name to your policy. The same is true if you drive someone else's car often. You should have them add your name to their policy. By doing this, you can be more certain that your car insurance will cover accidents in situations like this.

If you have questions about your auto insurance coverage, or if you need coverage, talk to a car insurance agent of your choice.