It may not happen all that often, but there is the odd time when the driver of a car is not the legal owner.

It’s just a simple matter of handing over the keys, isn’t it? Or is it?

What happens in the event of an accident? Whose car insurance company pays?  Does the insurance follow the car or the driver?

You need to have “the talk”.

The general rule is that car insurance goes with the car (rather than the driver).  If you lend your car to a friend, your insurance covers any damage that might take place just as it would if you yourself were driving (provided your friend is a fully licensed driver). It’s a good idea to talk with your friend before handing over the keys, so that he or she understands the limits of your liability coverage, as well as your deductible.

For example, if your friend inadvertently causes an accident while driving your car, your liability coverage will cover the damage to both cars, but only after you pay your deductible. So if you have a $500 deductible, you have to pay the first $500 before the insurance kicks in.

Who is going to pay that deductible?  You, or your friend?  Or, will you share the cost?  This is a discussion you should have prior to your friend taking your car out.  Otherwise, you could have a disagreement about whose responsibility it is, which could delay repairs, damage your friendship, and in the worst-case scenario, end in a legal battle.

What if you want to borrow your friend’s car?

Have the same discussion. Confirm that your friend has adequate car insurance coverage so that you will not get stuck with the bill and legal responsibility if an accident happens.

Ask whether your friend’s coverage includes only the province-mandated liability insurance (covers the other driver’s medical costs and vehicle damage) or if collision (protection for your friend’s car) and comprehensive (covers damage caused by vandalism, theft, weather or fire) coverage are included as well.

All of these factors weigh into the costs that could be incurred while you are driving a car that is not your own.

No insurance? Don’t drive!

If your friend does not have insurance, do not drive the car! If you are involved in a collision or pulled over for any reason, you will be held responsible, and quite possibly charged with driving an uninsured vehicle.

Your rates go up – even if you weren’t behind the wheel!

If a claim is filed with either of your insurance companies, your rates will increase.  In other words, you could end up paying a higher premium every month, quarter or year because your friend was a careless driver.

The best course of action is to call your own licensed insurance professional before you drive a friend’s car or allow a friend to drive your car.  Get all the facts about who would be responsible in the event of an accident.

If you decide to proceed, make sure you discuss car insurance first so that both parties are in agreement as to how you would handle various situations.  Some preliminary communication can ease both your minds, and it may even save a friendship.