Does Car Insurance Cover the Car or the Driver?
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UPDATED: Mar 13, 2020
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When purchasing auto insurance, it’s important to understand what you’re getting and how it works. Understanding the way that your coverages are applied to the loss is the first step in ensuring that you get the protection that you need. It will also help guide your decisions about who you allow to drive your vehicles and what coverages you carry.
One thing that many people may not realize is that car insurance nearly always follows the vehicle rather than the driver. This means that you, as the vehicle’s owner, are personally responsible for all damages that a vehicle may cause regardless of who is operating it at the time. This is important because if you allow someone else to drive your car and they cause an accident, you could be sued for the damages that they cause.
Can I Have Insurance Without Owning a Car?
It is possible to purchase car insurance as a driver without owning a vehicle, but it may not be necessary. If you drive a lot without owning your own car, you may wish to speak with an insurance company about purchasing driver-only insurance. Otherwise, if you drive infrequently and are familiar with the vehicles that you borrow, you can usually rely on the coverage on the vehicle itself.
Why Coverage Follows the Vehicle
Car insurance companies determine how much a policy should cost by estimating the risk of a claim being filed. Drivers who are considered high-risk pay more for auto insurance. The driver is not the only thing evaluated for risk, however: Vehicles have risk associated with them as well.
This is one reason that insurance companies assign policies to vehicles rather than drivers. A Land Rover can cause more damage than a smart car, and sports cars are statistically likelier to crash than minivans. Only by matching a vehicle to its risk can an insurance company accurately determine how much a policy should cost.
The other reason why insurance follows the vehicle is because vehicles can be involved in accidents even when not being driven. A car could be damaged by vandalism or weather events. It could also be hit by another car while parked, or slip out of gear and roll into another unoccupied vehicle. If cars were only insured while people were driving them, these claims could not be handled.
Exceptions to the Rule
There are a few occasions where an accident can be covered by something other than the owner’s policy:
— In certain states, borrowed vehicles are insured by the borrower’s insurance rather than the owner’s
For example, if you borrow a car in Texas and get into a collision, you can choose whether to use your own policy or the owner’s policy to cover the damages you cause. Most states do not handle damages this way, however, and not all insurance companies respond in the same way to this type of claim.
— Rental vehicles are an exception to the “borrowed car” rules
Unless you purchase insurance from the rental company or have it provided through your credit card, your own car insurance will transfer to any rental car that you drive. This is only true of rental vehicles; you cannot transfer coverages to company cars or other types of non-owned auto.
— If the owner’s insurance limits are exhausted, the driver may be held liable for the difference
This is one reason why you should make sure that a vehicle you borrow has full coverage auto insurance before you drive it. Otherwise, if you wreck the car and the owner doesn’t have sufficient insurance to cover the loss, you could be taken to court for the difference. The driver may not always be found liable, but it is a risk in some situations.
— Whenever a vehicle is stolen, all of the damages it causes are not covered by the owner’s insurance and the owner is relieved of all liability in the case
This is good news for the vehicle’s owner, who might otherwise be stuck paying for damages caused by the car thief, but it’s unfortunate for victims of damage that may not be able to recover damages from the thief himself.
— If you wreck a vehicle that you are test-driving, you may be held personally liable for the damages even though you don’t yet own the car.
If you do have car insurance, the damages to the test-driven vehicle will almost always be paid under your liability insurance rather than your collision coverage.
— Whenever you are injured as a passenger in another person’s vehicle, your own car insurance policy may cover for your injuries if you have first-party medical coverages.
This payment should be in addition to any settlement you’re entitled to from the vehicle’s owner, and it will help pay for your expenses in the event that you’re injured in an accident involving uninsured vehicles. This also applies to you as a pedestrian or bicyclist if you’re ever injured by a car. This is one of the only occasions where auto insurance truly follows the driver regardless of where you are or what you’re doing: As long as the injuries are caused by a vehicle, they will be covered by your medical payments or personal injury protection coverage.
Aside from these situations, vehicles are almost always covered by insurance regardless of who is driving the car. Accidents that the vehicle is involved in will count against your own driving record, even if you’re not involved; this means that a friend’s crash in your car could cause your rates to increase. Overall, it’s a good idea to never allow anyone to drive your vehicle unless you feel extremely comfortable with their driving abilities because the effects of a crash can be long-lasting and detrimental to your policy.