Knowing who is covered by your auto insurance policy is vital since misunderstanding the limits of your coverage can be a costly mistake if an accident occurs. If you lend your car to someone who is not listed as a named driver on your policy, you can't assume that permissive use coverage will apply if the driver gets in a car accident.
Your Auto Insurance Policy: Permissive Use
An auto insurance policy typically covers the policyholder and any additional members of the household. Some insurance companies require you to specifically list all household members of driving age, while others offer general coverage extending to people who are related through marriage, blood, or adoption. Roommates are typically not covered as members of the household unless they've been listed by name.
You should list everyone who will be driving your car on a regular basis as named drivers, even if they don't live with you. For example, you would want to list your nanny as a named driver if she uses a vehicle you own to take your children to and from school each day.
Permissive use extends to other people who don't drive your car on a regular basis but may borrow it on occasion. For example, this might include lending your car to a friend while hers is in the shop or letting your cousin borrow your truck, so he can move furniture to his new apartment. Many policies cover permissive use, but some do not. Others offer reduced coverage with a higher deductible for any accidents that fall under the permissive use criteria. You must check with your insurer directly to fully understand the limits of your coverage.
Exceptions to Permissive Use
Even if you have an auto insurance policy that allows for permissive use, there are some notable exceptions you should be aware of, including:
- Business use. One noted exception to coverage for permissive use occurs when the driver planning to borrow a vehicle is doing so for business purposes. If you lend your car to a driver who is visiting a client, traveling to a work-related conference, or making deliveries for her home-based businesses, this new driver won't be covered unless you have a specific "business use" clause on your car insurance policy.
- Inexperienced or unlicensed drivers. Insurance companies typically have stringent rules regarding the qualifications of people allowed to operate your vehicle. If you let your teenage niece use your car to practice for her driving test and she gets in an accident, you could very well find yourself paying for the damage she causes.
- Excluded drivers. Some auto policies, but not all, allow you to specifically exclude drivers in your household as a cost saving measure or to prevent the policy from being canceled due to a single high-risk driver. Anyone who is listed as an excluded driver on your policy will not be covered in the event of an accident, no matter why they were driving your vehicle.
Paying for Accident-Related Damages
If you lend your car to someone and he causes an accident that's not covered by the permissive use portion of your auto insurance policy, his own auto policy may pay for damages. However, not all insurers will pay for damages in cars the policyholder borrows, so you'll need to investigate this issue carefully.
If your own policy won't pay for damages and the driver's policy doesn't cover borrowed vehicles, you'll be left paying for damages out of your own personal assets unless someone else is determined to be at least partially at fault for the accident. Louisiana law allows partially at- fault drivers to receive compensation for property damage as well as medical expenses, lost wages, and pain and suffering if they were partially at fault, with the understanding that any settlement they receive is reduced by their assigned percentage of fault.