Say you loan your friend or family member your car. You trust them, they’re responsible, and yet, accidents happen. It’s no big deal, because they’re covered under your policy, right? Well, sometimes.
You see, there’s a unique group of people who fall under an umbrella auto policy, a “borrower” demographic that is gaining in popularity. It consists of licensed drivers who rarely drive or don’t possess their own vehicles. Instead, when they need to borrow a car, they use a family member or friend’s car, or they rent one from an agency.
But, one’s generosity to loan a car could actually hurt both parties—unless you’re really covered.
How It Affects Borrowers
Most of us are under the impression if we borrow a friend or family member’s car we’re automatically covered under that person’s insurance. That’s true if that’s how your friend’s policy is written. But, all auto insurance policies are not created equal. If they pay a lower premium, their policy may state they are the only driver insured to drive their car. And, they might not know that or be comfortable revealing the terms of their policy to you, were you to ask.
This is where non-owners auto insurance comes in. It was created specifically for people who borrow a car to drive and need their own policy to cover them in case of an accident. There’s no need for the borrower to invest in an annual policy for these infrequent car trips, but they do need to be held liable for bodily injury coverage, medical payment coverage, and property damage coverage.
Non-owners insurance is considered very basic insurance and cannot be substituted for regular car insurance, which includes comprehensive and collision damage, rental reimbursement, and towing reimbursement. In fact, many rental companies will not accept non-owners insurance to rent their cars, unless you purchase addition collision coverage as well.
Likewise, it doesn’t take effect until the owner of the car’s insurance policy has been maxed out. So, why do you need it? After all, what’s the use having the insurance if won’t even be the primary insurance used in an accident?
How It Affects Lenders
Think of it as travel insurance. If you get sick on a trip, your primary medical insurance will cover your bills. Anything it doesn’t cover, your travel insurance will kick in and pick up the slack. Non-owners insurance holds you—and not the owner of the car—liable if you hurt someone else in an accident.
So, while comprehensive and collision insurance is always a must, non-owners insurance puts a little more responsibility on the borrower’s financial shoulders, and less on the lender of the car you are borrowing. Because, god forbid you’re in a terrible accident and it exceeds the lender’s policy—you have your non-owners insurance to fall back on, potentially saving your hundreds of thousands in medical costs.
There are two types of coverage available: One in which you are the primary driver on a policy, but not the owner of the car, and the other where you are added to an existing policy, but don’t own the car you are driving.
Non-owners insurance costs approximately $300 to $500 annually—an extremely reasonable amount for a non-car owner. The price of your policy will depend on the same variety of factors used to price out a regular car insurance quote—where you live, type of car you are borrowing to drive, driving experience, credit history, etc.
Not all auto insurance carriers offer non-owners insurance, so be sure to check around online for a fair quote.