Steve Thompson, Yahoo Contributor Network
Most of us have an opportunity to loan out our cars now and again -- your friend needs to run a few errands but her car is in the shop, or your co-worker asks to take a spin in your brand-new SUV. Whatever the case, you need to make sure the person who borrows your car is insured to drive it since they aren't on your policy.
As a general rule, it is best not to let other people drive your car. There are numerous hazards associated with this practice, and even if they are insured to drive your car, your insurance rates will go up if they get in an accident. Furthermore, a car is a big investment that you shouldn't take lightly.
But we don't live in a perfect world, and you might need to let someone borrow your car. If so, there are a few things you should keep in mind.
In order for someone else to be insured to drive your car, even if they aren't on your policy, you must give that individual permission. This doesn't mean you need to sign a binding contract, but verbal or written permission is required if you want them to be covered under your insurance.
It's one thing if your co-worker asks to borrow your SUV and you give him permission. It's quite another if he swipes your keys from a desk drawer and heads out to the lot without your knowledge.
To be safe, you shouldn't let someone else drive your car unless you've defined the parameters of that person's usage. Know where he or she is going and when he or she will return so there aren't any disputes should something happen.
Named Driver Exclusions
Named driver exclusions are endorsements to your auto insurance policy to specifically exclude a driver from coverage. This means that if you allow this person to drive your car, he or she will not be covered under your policy if he or she gets into an accident or some other problem.
There are numerous reasons why your auto insurance coverage might include named driver exclusions. For example, when I insured my car I did not add my wife to my policy because she does not drive. She was a named driver exclusion because she lived in my home and had daily access to my vehicle, and the car insurance company didn't want to be responsible since I had elected to not include her in my coverage.
It is also possible for named driver exclusions to come into play if a friend or relative has gotten into a serious accident in your vehicle in the past. The car insurance company might cover the accident with the requirement that he or she become an exclusion from then on out.
Car Insurance Follows the Car
You've probably heard this statement before, and it holds true for nearly every auto insurance policy in the United States. When you insure your vehicle, the car insurance protects the vehicle regardless of who is driving, as long as that person meets the previous two qualifications.
If you let someone drive your car and he gets into an accident, your insurance policy will be considered the primary coverage for the damage. If he has insurance in his own name, it may act as secondary coverage, which means it may cover any damage that falls outside the parameters of your policy.
Car insurance is complicated, and as mentioned above, it is easiest if you don't let anyone else drive your car. If it is necessary, however, it is best to know what coverage you have and how your car insurance company treats other drivers.