My Friend Wrecked My Car. So Who Pays For It?

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Q: I let my friend borrow my car and he wrecked it. Who pays?

A few weeks ago, a friend of mine borrowed my car for an afternoon because his was in the shop. During that time, he ran a stop sign and hit another car, causing damage to both vehicles--it was definitely his fault. Who pays for the damage? Is it covered by his auto insurance, or mine?

A: It is important to keep in mind that, regardless of who is driving, insurance follows the car.

In a vast majority of cases, if an accident is caused by someone who is borrowing your car, liability will fall on your shoulders and should be covered by your auto insurance company, up to your coverage limits. If the costs exceed your limits, your friend’s auto insurance policy (if he has one) may take up the slack; otherwise, you will be responsible for paying the difference. Keep in mind that you will need to pay your deductible and that your insurance premiums are likely to increase.

Exceptions may be made if your car was in an accident after being stolen, or if it was used by your friend without your permission. In the latter case, liability would be assigned to your friend, with his insurance being the primary and yours the secondary.

There is one important caveat. If your insurance company discovers that your friend actually lives with you and frequently uses your car, but you have not disclosed this and added him to your policy, they will have grounds to deny your claim altogether. In most cases, however, insurance companies will cover your liability costs anyway, but will then penalize you by either cancelling your policy or drastically raising your premiums.

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