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Written by:
Shivani Gite
Contributing Writer
Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. When not writing, you can find her reading a book or watching anime.
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Reviewed by:
Laura Longero
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Executive Editor
Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

Borrowing the carWhen you hand someone the keys to your car, you’re handing over your car insurance coverage, too.

  • If your family member or friend or colleague causes an accident in your car, it is your insurance that pays — and your rates that rise in response.
  • Once your insurance hits its limits, the borrower’s policy kicks in.
  • If he or she doesn’t have a policy, then you as the car owner are on the hook for the damages that insurance doesn’t cover.

Clearly, your finances are at risk if you let the wrong person drive your car.

Who does your car insurance policy cover?

The drivers listed on your policy are always covered with no restrictions.

After that, you could face additional risks.

Typically anyone driving your vehicle with permission is covered, but some insurers put restrictions on coverage of drivers not listed on the policy. A few of the more common ones are:

  • Drop-down limits: This policy provision will drop the coverage for anyone not listed on the policy to the state minimums, even if the user has your permission. This will often be a dramatic reduction of coverage.
  • Double deductible: This doubles your deductible on your collision coverage for any non-listed drivers. A $500 deductible is now $1,000.
  • No physical damage coverage: This means that if a driver not listed on your policy has an accident, your insurer will pay the third-party liability damages but not repair your vehicle.

A friend or family member who is living with you or driving your vehicle on a regular basis should be listed on the policy. If you have a teen driver, adding him or her to your policy as soon as he or she gets a license is important.

Even if your policy doesn’t have permissive restrictions, as a car owner you are responsible for paying the deductible needed to repair the car. Even if you were not driving, your rates will probably rise.

And if the damages exceed your policy limits, the victims could come after your personal assets. Nothing can stop someone from suing you.

Watch out for exceptions to permissive user

Some very cheap insurance policies restrict coverage to the named driver only. In those, there is no such thing as a permissive user, and you would not be covered if a friend drove the car and wrecked it. You would also be personally liable for all the damage your car inflicted.

Almost all car insurance policies for private vehicles exclude coverage for business use. For example, if you deliver pizzas, you need a commercial policy.

Insurance companies and peer-to-peer car-rental companies such as Relay Rides still argue over how liability should be handled when private car owners rent out their cars.

Insurers argue that letting strangers behind the wheel adds risk to the policy, a risk they cannot assess. 

“Peer-to-peer car sharing services are doing a disservice to customers by not disclosing they are putting their personal insurance and perhaps their own assets at risk,” says Loretta Worters, spokesperson at the Insurance Information Institute. “Customers should be aware that if their vehicle is being used as a commercial venture, it should be insured with a commercial policy.”

Do your research. Make sure you’re not violating any portion of your personal auto insurance contract. Look into the insurance that the car-sharing plan has in place to make sure it’s financially fit to payout high-dollar claims if the worst-case scenario occurred.

— Mark Vallet contributed to this story.

Laura Longero

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Laura Longero

Executive Editor

Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

John McCormick

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John McCormick

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John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.

Leslie Kasperowicz

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Leslie Kasperowicz

Managing Editor

Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.

Nupur Gambhir

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Nupur Gambhir

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Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.

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Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. When not writing, you can find her reading a book or watching anime.