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UPDATED: Mar 13, 2020
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You may have heard it said that “car insurance covers the driver, not the car.” However, this is a misunderstanding of the relationship which exists between a car insurance company and a customer. It is true that, if you have liability coverage, you are covered for almost any vehicle you drive, with some important exceptions. However, your car may not be covered when it is driven by just anyone. Here are some examples of how car insurance companies assess situations in which drivers operate vehicles and cause accidents.
Your liability policy covers you and any drivers you add to your policy
Prices vary for coverage of different drivers; if you add teens to your policy, expect higher premiums than if the only covered persons are you and your spouse. When you purchase your liability policy, what you are telling the insurance company is that you want them to cover you, anyone who lives in your household and is listed on your policy, and all the vehicles you have listed for coverage. This means that no matter who in your household drives your car, or if you drive someone else’s car belonging to a member of your family, everyone is covered for liability.
You can make “exclusions” in many states of people who live in your household
This is tantamount to saying that you will not be responsible for this person’s driving and will not allow him or her to use your vehicles. Some people choose this option when they have a grown son or daughter living at home who provide their own coverage, or if someone in the family has something very bad on their driving record, such as a conviction for DUI.
When you drive someone else’s car, their insurance coverage may pay for damage you cause, but their company might subrogate the claim to your company
This means that their insurance company would ask your company for reimbursement under your liability policy. This would have the same consequences as if you had an at-fault accident for which your company had to pay; your premiums would likely go up, and your coverage might even be dropped, depending on the circumstances.
What about if you let someone else drive your car?
The same rules apply in general; that person’s liability insurance will probably be called on to pay for damages he or she causes while driving your car. However, your collision or comprehensive insurance might also have to pay a claim to pay for the damage to your vehicle.
People can be excluded from insurance coverage, however, under certain circumstances. If you knowingly allow someone without a driver’s license to operate your vehicle, for example, it is very possible that your insurance company will refuse to pay your claim. Similarly, if you were using your car for some illegal activity, or were involved in a hit-and-run, many states allow your insurance company to deny you coverage.
It is important to think about who is going to be driving your vehicle, and include those people in your listed drivers when you obtain insurance coverage. In most cases where there is a question of covered drivers, it is an honest oversight; however, some people try to save on premiums by concealing the fact that they have others living in their household who might drive their vehicles. If you do this, and that person wrecks your car, you may find yourself without coverage for the damages.
Your collision and comprehensive coverage pay for damages to your car when you or a covered driver are at fault. If you choose not to take out comprehensive and collision insurance, you will not have coverage to pay for damages caused by you or another driver, such as body repairs or theft. Be sure to carefully consider your need for insurance and balance this with your budget for automobile insurance coverage. You can often save money on your car insurance by taking advantage of discounts and manipulating your deductible amounts, making it feasible to insure everyone in your household.