Which insurance company handles the claim? The owner’s or the driver’s? Does the auto insurance coverage apply to the car or the driver? Read on to find the answers to these questions before you lend your car to a friend or borrow theirs.

Have the insurance coverage talk

Generally speaking, auto insurance covers the car and any drivers named on the car’s insurance policy. That being said, if you lend your car to a friend and the friend has an accident, your insurance will cover damage to your vehicle the same way as if you’d been behind the wheel.

Before you hand over your keys, take a few minutes to talk to your friend about how much liability coverage your policy includes and your deductible amount. And make sure you agree on who will pay the deductible if there’s an accident!

Let’s say your friend backs your car into your neighbour’s fence and damages it. No problem—the liability section of your insurance policy will cover the damage to the fence. And the damage to your car? It will be covered if you have collision coverage (commonly called “being insured on both sides”).

Before processing the claim and paying for the damage, your insurance company will require payment of the deductible indicated in the insurance policy (often $500). So, who will pay the deductible? You? Your friend? 50/50?

Again, make sure you agree on this before letting your friend drive your car. Otherwise, you could be stuck paying hundreds of dollars for the deductible and dealing with the inconvenience of a car accident that you weren’t even involved in (i.e., damage to your vehicle, possible insurance rate increase). And it could hurt your friendship.

If you borrow your friend’s car

Have the same discussion! Make sure your friend has valid auto insurance to avoid problems. And make sure you have coverage for damage to vehicles you don’t own.

No insurance? No thank you!

If your friend doesn’t have auto insurance, don’t borrow their car! If you’re involved in an accident or if you’re stopped by the police for any reason, you’ll very likely get a ticket for driving an uninsured vehicle.

Your premium could go up, even if you weren’t driving!

If you file a claim with your insurance company, your premium might increase. This means you could be stuck paying more for your insurance because of your friend’s bad luck or carelessness.

Communication is key to avoid unpleasant surprises. Make sure you and your friend are on the same page before handing over your keys. If an accident happens, you’ll know how to handle the situation—meaning you can save your friendship and a whole lot of headaches!