Lending your vehicle: car insurance and vehicle loans
Your neighbor is taking his family to the lake this weekend. However, their minivan is out of commission for repairs. Their vacation is at stake. You, being the good neighbor that you are, let them borrow your vehicle for two or three days. No big deal, right? Well, here's the thing:
When you allow someone who isn't on your policy to take a ride in your vehicle, you're also sharing your car insurance. This is because your car insurance is tied to the vehicle, not the individual driver. In most cases, a guest driver would be covered under your car insurance policy. The key word here is "guest"—meaning someone who doesn't use your vehicle every Friday night to visit their aunt two hours away. However, this also means that if the guest driver is involved in a collision while driving your vehicle, your premiums can be directly affected. As you may know, the more accidents or traffic violations you have, the more likely you are to see higher rates.
Should you...?
Should you lend your car to a neighbor, friend, or family member without them being listed as an occasional driver on your car insurance policy? Depending on the circumstances, perhaps. But there's something you should keep in mind.
First, you must verbally or in writing agree that the driver is authorized to use your vehicle. Second, if you plan to lend your vehicle to this person—friend, family member, neighbor, colleague, etc.—on a regular basis, you must name them as an occasional driver on your insurance policy. Update your policy accordingly or call your insurance broker to inform them of the change. Finally, anyone borrowing your vehicle must have a valid driver's license and be legally authorized to drive in Quebec. If you lend your vehicle, you're also lending your car insurance!
Remember: accidents happen.
Driving a motor vehicle always carries risks. Even the best drivers aren't immune to accidents on the road. When you lend your car and your auto insurance, you expose yourself to potential liability that may or may not be covered by your auto insurance or may exceed your existing liability limits. If your friend is injured while driving your car or injures the occupants of another vehicle, any difference in the amount awarded by the court that exceeds your insurance coverage will be your responsibility, and this can amount to hundreds of thousands of dollars.
Do your research on the person you plan to lend your car to, as you risk being held financially responsible. Your insurance rates and your relationship with this person could also be at risk. Ask yourself if the person you plan to lend your vehicle to has the following characteristics:
- Previous traffic violations?
- A reputation for reckless driving?
- A history of at-fault accidents?
- Bad driving habits?
Even if the person you plan to lend your vehicle to is your best friend or even a family member, if they have poor driving habits, numerous traffic violations, or have been involved in several accidents, you should perhaps reconsider lending your vehicle to them. Furthermore, if this person intends to use your vehicle regularly, they will not be covered by your auto insurance. You will need to ask your broker to update your policy to reflect this with your friend designated as an occasional driver.
Anyone who regularly uses your vehicle, such as young adults, roommates, parents, etc., must be listed as an occasional driver on your insurance policy.
Questions to ask yourself:
Ultimately, it's your decision whether or not to lend your car and insurance to someone else. Consider the driving habits of the person you plan to lend your car to, the potential impact this could have on your future premiums, and finally, ask yourself if you're prepared to assume full responsibility for the actions of the person you're borrowing your vehicle from and pay for any unsatisfactory judgment not covered by your insurance. Your savings could be at risk.
If you're still unsure, consider consulting your car insurance broker about the situation. They can give you a better understanding of the steps to take. They can remind you of the potential consequences of borrowing your vehicle and advise you on what you can do to protect your future rates and reduce your risk.
You can seek advice from a professional car insurance broker by contacting Panda7 today or request a car insurance quote.