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by David Harlow on April 11th, 2004

David Harlow

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If I lend my car to a friend and they have an accident that they caused and they have car insurance, will their insurance cover damages or liabilties, or will responsibilty be on my insurance?

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  • by Andy Is Wicked Married to Penal Colony on April 21st, 2004

    Andy Is Wicked Married to Penal Colony

    Depends on the laws in your locality, but the general rule of thumb is that the insurance follows the vehicle and not the driver. That is most commonly the case. Typically, it goes like this: your insurance is the primary for liability/damages, if your liability limits are exhausted then the secondary insurance applied is that of your friend (if they have a valid policy), if both exhaust the liability limits then the third line is the insurance of the accident victim from their underinsured/uninsured motorist coverage (if they have any), and finally when all liability limits are exhausted then a judgment to pay damages will be handed down to either you, your friend, or both (again, this varies by locality).

    Seems pretty impossible for that to happen, but it does a lot more than most people realize. Especially, when one cannot count on the fact that parties 2 (friend) and 3 (victim) even have insurance. The other scenario is that everybody is carrying the minimum required by law. For example let's say your bodily injury/property damage liability had limits like this: $25,000 payable to one injured party/$50,000 payable to more than one injured party/$25,000 payable for property damage.

    Okay, so your friend has a wreck and hits a new Mercedes Benz and totals it, guaranteed $25k property damage won't be enough to cover property damage liability. And if they took out a telephone pole or damaged other property besides the car then that must be paid for too.

    Say there are 2 people in that car and they are badly hurt (or really good actors/hire an aggressive attorney) and they sue for a $1,000,000 and win. That $50k limit is a drop in the bucket. Even with all 3 parties insured, you can see how quickly the money runs out.

    Best advice? Never loan your car out and carry high limits of liability insurance.

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