Know before you loan: Important facts about lending a vehicle

Whether it’s for a short road trip or for a quick drive on moving day, most people don’t think twice about lending their vehicle to a friend or relative. What they also don’t think about is the potential impact on their car insurance.

Before you hand over your keys, you need to be mindful of your responsibilities as the vehicle owner. The driver you're lending your vehicle to must also be aware of their responsibilities when they’re behind the wheel in your car.

Your insurance is taking the same trip

When you lend your vehicle to someone, it’s your auto policy that’s covering the driver, not theirs. That means if there’s an incident, be it major or minor, it’s your policy that’s affected.

So, if your friend gets into a collision while behind the wheel of your vehicle, it goes on your insurance record, not theirs (even if they have coverage on their own vehicle) and you’ll be filing a claim with your provider.

Therefore, you’re not only lending them your vehicle, but you’re also loaning them your insurance record and policy.

If they get a ticket while driving your vehicle, it will be in their name and go on their driving record, and your insurance won’t be affected. However, a violation that involves roadside penalties, such as impaired driving or driving at an excessive speed, could lead to your vehicle being towed and impounded.

Furthermore, if your friend is found to be at fault for the collision, you’re at fault from an insurance perspective, even though you were never there. As the vehicle owner, you could end up paying more through a deductible or a higher insurance rate. You may even end up paying out any damages and liability claims because of a collision for which you were never present.

If your vehicle is stolen while in the care of your friend or relative and you have comprehensive coverage, you’ll be covered for the loss no matter who drove it last. While it’s unlikely your premium would be affected by the insurance claim, you’ll still have to pay the deductible.

Establish ground rules when lending your car

It’s not that you should never loan out your car to a friend, but you need to qualify any driver when you do.

  • Make sure the borrower has a valid driver’s licence for the province or territory that you both live in.
  • Lay out rules for anyone who borrows your car, which should include no speeding, eating, and not letting anyone else get behind the wheel.
  • Agree on how the car can be used and where it is being driven — don’t hesitate to put it in writing.
  • Prepare them to drive your vehicle so they’re comfortable finding everything, such as windshield wipers and cruise controls.
  • Show them where they can find a copy of the registration and proof of insurance in the car.
  • Err on the side of caution and inspect the vehicle before it’s lent out by checking that all signals, brake lights, and other important functions of the car are in good working order.
  • Note the number on the odometer because it will allow you to check whether the agreed-upon usage for the car is being exceeded, and it never hurts to know how much mileage is being added by someone else.

Overall, you want to make sure your vehicle is in good shape before you lend it out. Also, as a good friend, you wouldn’t want someone to run into difficulties while they’re on the road.

Be selective about sharing your vehicle

Let’s say you lend out your vehicle to the same person regularly. In that case, you may consider adding them as an occasional driver to your insurance policy, especially since you’re lending them your coverage anyway.

If a borrower is not listed on your policy and drives your car regularly, your insurance provider may deny a claim. An occasional driver, otherwise known as a secondary driver, is someone who drives the vehicle less than 50% of the time. You’re the primary driver.

Similarly, if you need to borrow someone else’s car, you should have the same discussion, and be sure the vehicle is adequately insured, so you don’t get stuck with bills or are held liable if you’re in a collision.

Remember, when lending your car, you’re also lending your car insurance. Whoever borrows the vehicle needs to respect your rules and understand the responsibilities that come with it.

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