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This newsletter edition we will take a break from taxation and pension plans to offer you some less known information on how car insurance works when you drive someone else’s car or a rental.
For most people, driving a car has become as ordinary as having coffee in the morning, yet accidents do happen and sometimes they do when you’re behind the wheel of someone else’s car. The obvious question in such circumstances is who is liable for coverage.
First and foremost, your policy covers your cars. Your cars are covered when you get in an accident and you and your passengers are covered if you are injured in your cars. Others are covered if injured by your cars. Comprehensive and collision insurance covers your car only.
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Nevertheless, there are parts of your car insurance policy that do follow you when you are driving someone else’s car. Most commonly, your liability coverage pays for claims that occur in listed vehicles, rented vehicles, and borrowed vehicles.
Drivers who drive their own car are legally required to purchase at least the minimum amount of liability coverage set by state law. Liability coverage has two components:
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- Bodily injury liability to help pay for costs related to another person's injuries if you cause an accident.
- Property damage liability to help pay for damage you cause to another person's property while driving.
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Generally, the vehicle owner's insurance provides primary coverage, regardless of who is driving the vehicle. Persons living in the same household are usually required to be included on the vehicle’s insurance policy.
Although an insurance plan typically extends to other drivers who use your car infrequently, rules are different for people who use your car regularly.
When someone uses your car on regular basis, you ordinarily have to name that person as a driver on your insurance policy to make sure that they are covered. Anyone who lives in your home may be considered a regular driver that needs to be listed on your plan.
When your car is driven by someone who is not a member of your household and is not listed on your policy, he or she is still covered by your car insurance policy on account of the aforementioned fact that car insurance follows the car.
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The term for the non-family member operating your vehicle is, “permissive driver” which refers to a person that is not listed on the policy but who operates an insured vehicle with the permission of the owner.
If you are driving a car you don’t own, you should be aware that the vehicle owner's policy might place limitations on who can borrow the car (if there is failure to comply with the policy terms, with state laws there may be a reduction in coverage provided or coverage may be denied). Also, some states have very low liability limits so, if you drive someone else’s car and you get into an accident, the damages may exceed the amount specified by the owner’s liability coverage.
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This is when your own car insurance kicks in. If you have automotive insurance of your own, your policy provides secondary coverage for any accidents you may get into while driving a car you don’t own. Liability coverage under your existing insurance will automatically follow you when you drive cars that aren’t on your policy. Coverage only follows you when you don’t own the vehicle you’re borrowing.
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If you rent a car or borrow a car to replace one of your vehicles while it’s being repaired or serviced, your physical damage coverage may extend to the temporary substitute
If you don’t have a car and car insurance of your own, but you plan to drive a car, it’s a good idea to have some type of coverage, such as non-owners’ auto insurance which provides liability protection for a driver who is renting or borrowing a car. In this case, you’ll name yourself as primary driver on a policy, but without attaching a vehicle to the policy.
To be able to make the right choice, you should check the auto insurance policy both for your car and the car you are driving (if it is someone else’s car). Because the policy terms and state laws can vary widely, always contact your insurance agent before loaning out your car.
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Knowing the provisions of your own auto insurance policy is also important if you want to rent a car.
Often, rental car companies try to present rental car insurance as a legal necessity that you must purchase. As a matter of fact, coverage from your own policy applies when you are using a rental car for personal, nonbusiness purposes. (The rules may be different for business use of a rental car.)
If you carry comprehensive and liability coverage on your personal car, coverage typically will extend to your rental car within the United States. If you’re renting a car in the U.S. of similar value to your personal car, in all likelihood the insurance coverage will be adequate for the rental.
Most U.S. states have mandatory minimum requirements for liability insurance, which cover at least property damage and bodily injury. Comprehensive and collision coverage are not always required. Comprehensive insurance (also known as “other than collision” in some states) covers damage to your car caused by events that are out of your control.
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It covers things like theft, vandalism, glass and windshield damage, fire, accidents with animals, weather/acts of nature, etc. You should make sure you have enough insurance coverage and know your policy limits.
In any case, most rental companies provide basic public liability and property damage coverage for its vehicles and their renters and authorized drivers as required by applicable law.
If this basic coverage is not included in your rate, the rental agent will request proof of insurance. If you do not have insurance, you will be required to purchase car rental liability insurance from the car rental company.
The rental liability insurance covers third party public liability and property damage claims against you while in the rental car (damages you cause to other people's vehicles, property, etc). Liability insurance coverage for a rental car (either included in the rate or provided through your personal auto insurance) does not include coverage for loss or damages to the rental car itself.
If there are any gaps in coverage with your personal auto policy, the credit card company could provide secondary coverage. Many credit card companies offer rental car insurance as long as you book and pay for the car with the credit card. Some companies offer at least a basic amount of secondary coverage for free, while others assess a small fee for more extensive insurance coverage or full responsibility.
Make sure to check with the credit card company - the credit card that you’ll be using for your car rental.
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Remember at all times, the more informed you are about the provisions of your auto insurance policy, the better prepared you are when using your car, someone else’s car, or a rental one.
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