Automobile insurance can be a complicated issue for some individuals. This is understandable; after all, with all the rules, clauses, exceptions, and so many others, who has the time or inclination to read the fine print anyway? However, there is one rule that is very important and which should be remembered: insurance follows the car, not the driver. Taken at face value, this rule just seems to add to the confusion. But with a little effort and understanding, you will see the value of this rule and the hassle you will avoid if you follow it.
Your car insurance is influenced by many factors, are the car itself and you, the owner. But if you allow someone else to drive the car and he or she becomes involved in an accident, a host of complications can arise. Even if the person you loaned the car to carries his/her own insurance, it is YOUR insurance company that will pay for any claims. Your insurance is considered the primary source of claim payments; your friend’s is only secondary. If your insurance is insufficient to cover the cost of the damage involved, it’s only then that your friend’s insurance will be tapped for additional funds.
It gets worse if the person you loaned your car to caused the accident. The incident will be noted by your insurer and since your car was the “at-fault” car, you can reasonably expect to be penalized via higher premiums or the removal of your insurance discount, if you have one. And if your friend does not have insurance of his/her own, the injured party may come after you to recover any damages if your policy is insufficient to make the necessary financial compensation.
There are some exceptions to the rule, however. For instance, if your car was stolen and the thief got into an accident, obviously you have no cause for worry because you won’t be held liable for that. And in some states, if you allow another person to use your car as a temporary substitute vehicle for his/her own car, both the other driver’s and your insurance will be held as co-primary – meaning, any arising claims will be shouldered by your insurance companies.
But for the most part, you would be wise to observe the rule of insurance follows the car, not the driver as much as you can. Doing so could save you and your friend a lot of trouble and keep away the specter of higher insurance rates or even a policy cancellation.