Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 21, 2020

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Here's what you need to know...

  • How your coverage works depends upon how the driver who is borrowing your car
  • The limits that you carry depend upon the state requirements
  • Liability insurance is designed to pay for both third-party bodily injury damage and property damages

One of the most confusing questions that you can ask concerning personal car insurance is just how your insurance works when you drive a friend or family member’s car.

Knowing how to distinguish between situations where your insurance will follow a listed driver as opposed to a covered vehicle is critical before you ever drive a non-owned car.

If you take the time to learn about the different scenarios and how your personal coverage might kick in, you can decide if it is in your best interests to get behind the wheel of a car other than yours.

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Table of Contents

Liability Insurance: Primary Coverage vs. Secondary Coverage

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Allowing someone to borrow your vehicle can really complicate issues when you need to file a claim as a result of your decision.

A claim can already be difficult to investigate. When there are two separate policies that may provide coverage for the damages, you will see how coverage extensions are something agents and representatives would prefer to avoid.

While rules and laws concerning coverage can vary from state to state, the policy that actually covers the vehicle is generally considered the primary coverage provider.

This means that when someone is borrowing the car, the vehicle owner’s insurance will pay out for both liability and physical damage claims before any other policy pays.

The driver’s policy on their own vehicle may then act as a secondary plan that will cover damages if they exceed the limits on the primary plan.

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Why Granting Permission Matters

How your coverage works depends upon how the driver who is borrowing your car is defined. It is easy to assume that you can allow just anyone to borrow your car who is not listed on your policy once you learn that permissive drivers are covered.

Unfortunately, not everyone will be eligible for the permissive user status. You must grant permission to the driver to fit this definition before your insurance coverage will provide any type of cover for an unlisted driver in an accident.

Here are a few frequently asked questions when it comes to driving someone else’s vehicle:

Who is eligible for permissive user status?

Permissive use is determined an appropriate classification when a driver who does not have regular access to the vehicle in question and they are granted express permission to drive the car by the policyholder.

The main reason for confusion behind permissive drivers is the fact that not everyone is eligible.

Who is ineligible for permissive use status?

If anyone could be labeled as a permissive driver, policyholders would simply choose not to list high-risk drivers who would drive their premiums up.

To prevent this from happening, underwriters require that all regular drivers are listed on the policy for a claim to be covered.

A regular driver is a driver who lives in the household where the vehicle is kept or who has regular access to the car in question.

There is also an exception to the permissive use rule as far as unlicensed drivers are concerned. This is why you need to check with your agent whenever you have a new driver in your home that will be driving the car for extended periods of time.

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What happens when drivers are excluded?

A driver who is excluded from coverage on a policy will not receive coverage even if the driver fits the permissive use classification.

To exclude a driver from being a chargeable driver, the policyholder must sign a document that says no claims will be covered when that specific person is operating the car.

While driver exclusions do make liability claims easier for the primary insurer, the excluded driver’s policy may kick in for protection.

How will liability insurance pay?

Liability insurance is designed to pay for both third-party bodily injury damage and property damages when you or the person who borrows your vehicle is liable.

All policies have some form of liability insurance built into them.

The limits that you carry depend upon the state requirements and whether or not you have chosen to carry higher limits.

The primary policy will pay up to the Bodily Injury and Property Damage limits that are on the policy.

This is because the registered owner of the vehicle is technically responsible for damages that are caused in their vehicle.

Once the limits for each person or for damages are exhausted, the person who is borrowing the car can use their insurance to protect their assets.

The victim can take both the vehicle owner and the driver of the car to court when all of the costs are not covered.

Physical Damage Coverage: Which policy will pay?

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Liability coverage can be very confusing in terms of how coverage extends, but how coverage is applied for physical damage claims is a bit easier to understand.

If the vehicle is damaged in a loss when a permissive driver is driving, the physical damage coverage will follow the car. This means that the car must be covered by comprehensive and collision coverage for the damage to be paid.

The physical damage coverage on the driver’s policy will not generally extend to the borrowed car because this area of coverage is tied to the car.

The only time damage coverage extends to unlisted cars on a policy is when it is a replacement or a newly acquired vehicle.

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