Lending your vehicle to a long-time friend or close family member seems like a no-brainer. However, this simple act of kindness can have big repercussions on your insurance. Drivers should be aware of their responsibilities as the owner of the vehicle before handing over the keys.
The person borrowing your car needs to be conscious of their role behind the wheel and how they are accountable for your property. Here are some tips to keep in mind before offering your vehicle to other drivers and how to make sure your guest is taking their responsibility seriously.
The Insurance Follows the Car
When it comes to lending a car, it is the insurance policy taken out by the owner of the vehicle that should handle any incidents that might occur.
The Insurance Bureau of Canada (IBC) reminds drivers, “If the person borrowing your car has a collision while driving your car, it goes on your insurance record. When you lend your car, you are also lending your driving record.” In other words, if you lend your car, you are also lending your car insurance.
Even if the borrower has their own insurance policy on another vehicle, that does not negate the fact that the primary policy may be that of the owner of the borrowed vehicle. If there is an accident, it will generally be the car owner’s insurance and not the driver’s that will handle the claim.
This means that if someone borrows a car and is involved in an accident through their negligence (meaning they are at fault), it may cost the owner of the car in the form of a deductible and/or increased insurance rates. The insurance policy on the car may be responsible for paying out any damages and liability claims.
Therefore, the rate increase for the accident will typically appear on the owner’s insurance and not on the driver’s insurance. "The owner of the vehicle is responsible for their property, even when they are not present”, Anne Marie Thomas, resident insurance expert for InsuranceHoteline.com, warns drivers. “Giving permission to a guest or occasional driver to use your vehicle, is also granting them access to your insurance." That’s why it is vital to be certain the person driving is trustworthy and responsible.
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A Car Lending Checklist
Before handing over your keys, make sure you check all of these boxes:
- Ensure that the person borrowing the car has a valid driver’s licence. This may seem obvious, but it is vitally important.
- Make sure that a copy of the registration and proof of insurance are in the car and let the borrower know where to find them.
- Verify that both parties are agreed on how the car can be used and where it is being driven. You may even want to have a written agreement.
- Ensure the borrower knows not to let anyone else drive the car.
- Check the odometer before lending the car. Even if the driver is a trusted friend or relative, it can’t hurt to know. Extra kilometers on the odometer will make it clear if the agreed usage for the car is being exceeded.
- Make certain all signals, brake lights, and other important functions of the car are in good working order.
With an understanding of what it really means to lend out a car, it becomes clear that it is important to be choosy when making this type of decision. Drivers who are trustworthy and have a proven track record of clean driving are good choices – steer clear of lending to anyone who might be irresponsible as this could affect your auto insurance rates in the future.