We have all been in the position of lending our vehicle to a friend or relative to drive on occasion. In fact, most of us wouldn’t give it a second thought when asked and happily give over our keys. There are certain risks in doing this and, under some circumstances, this may not be a wise decision.
In the State of Oregon, most standard liability vehicle insurance policies “follows the vehicle.” This means, whoever is driving the vehicle is usually insured under the policy on the vehicle. In other words, if you lend your vehicle to a friend and they get in an accident while driving it, then your insurance policy is considered primary and your insurance will come first into play for the accident. This could be very expensive for you in the long run in a variety of ways:
- If your friend was at fault for the collision and there is damage to the vehicle, your collision coverage will be used to pay for the damages. You will be subject to your limits and you will need to pay your deductible. If your deductible is $1000.00 you will need to pay the first $1000.00 to the repair shop. There is no policy in force to make your friend pay this money and it will need to come out of your pocket.
- If your vehicle is damaged beyond repair and is considered a “total,” you will be subject to your deductible and you will be in a position of needing to purchase another vehicle. If you still owe money on the vehicle, the money will go to the lien holder first and then anything leftover will be paid to you. You will then need to purchase another vehicle. If you are not in a financial position to purchase another vehicle, you are stuck as you cannot force your friend to buy a vehicle for you.
- If you don’t have rental car insurance on your policy you will be without a vehicle while your vehicle is being repaired or “totaled.” You cannot force your friend to pay for a rental for you.
- If your friend caused damage to others during this collision, your liability policy will come into play to reimburse the damaged parties. If there was significant damage or injury to another party and you have low policy limits, you might be liable if you were in any way negligent in lending the vehicle to your friend.
It is a good idea to have an understanding about who is responsible for deductibles before you lend your car. A simple “you damage it, you pay for it” agreement will help you and your friend understand who is on the hook for damages and deductibles.