Do You Have Insurance When You Use Someone Else’s Car?

Bob is a sales manager for a chemical equipment company. He drives his employer-furnished car thousands of miles each quarter on business. He also drives it on weekend trips, errands around town, and vacations. Focused on his job, he doesn’t give much thought to who will pay if he has a car accident.

Janet and her husband own one car and can’t afford to buy a second right now. They get by as best they can with one, but sometimes this is a challenge. It seems like a gift from heaven when their retired neighbors offer to let Janet use their car over the winter while they live in Florida. Janet doesn’t think about insurance coverage; she’s thinking about how she no longer has to take a 90-minute commute involving three buses.

Bob’s employer has an auto insurance policy that will cover an accident he has while using his car on company business, but it might not cover accidents occurring when he drives it for personal use. If Bob strikes a pedestrian while driving to a sales appointment in midtown Manhattan, his employer’s insurance will probably cover any liability for the injuries. However, if he hits another car while he’s on vacation in Hilton Head, the employer’s policy might not apply.

Janet’s auto insurance policy will not cover an accident she has while she’s using her neighbor’s car. The policy states that it does not apply to injuries or damage resulting from the use of a vehicle that is A) furnished or available for her regular use; and B) not listed on the policy (an exception is would be a loaner car she has while her car is being repaired.) Her neighbors have made their car available to her to use anytime for a period of months. Consequently, if she’s involved in a multi-car pileup on the way home from work, and she is at least partly liable for the accident, her insurance will not cover her share of the liability. If the neighbors have insurance in force, it should cover the accident. If, however, they forgot to pay their premium and the policy has been canceled, there will be no insurance available.

Both Bob and Janet could use some additional low-cost coverage on their auto policies. This coverage, Extended Non-Owned Coverage–Vehicles Furnished or Available for Regular Use, extends the policy’s liability and medical payments coverages to cover situations like Bob and Janet’s. The coverage has two important features:

It applies only to the person listed on the policy endorsement unless indicated otherwise. If the endorsement shows only Bob’s name, then the policy will cover only him for the use of the company car. Otherwise, the policy will cover him, his spouse and any family member using the company car.

The coverage applies on an “excess” basis over other collectible insurance. This means that the insurance company will look to the vehicle owner’s insurance to pay first; if that insurance doesn’t apply or gets used up, then the individual’s policy will pay. For example, if Janet’s neighbors have a valid insurance policy, their policy will pay for the loss until the amount of insurance is used up; then Janet’s policy will pay. If the neighbors’ policy has lapsed, Janet’s policy will pay from the first dollar.

Individuals with situations similar to Bob and Janet’s should consult with a professional insurance agent about the cost of purchasing this coverage. For a relatively small cost, they can protect themselves while they enjoy the use of a vehicle someone else owns.

 

About Brian Hendricks

Brian Hendricks is the President of Fidelity Insurance Group. Brian started Fidelity in 2003 with 0 clients. Today Fidelity Insurance Group is a Premier Independent Insurance Agency in Florida with over 3,000 families and businesses insured. Brian currently serves on advisory boards for 2 of the largest property insurance companies in Florida. Knowlege, Integrity, and Committment are his and his agency's guiding principles.
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