Let’s say your roommate’s car is in the shop, and he desperately needs to run to the grocery store to pick up a few items. Being the good friend that you are, you toss him the keys to your car, and tell him to run whatever errands he needs. Something like this is no big deal, right? If anything goes wrong while your friend is behind the wheel, your insurance will take care of it, right?
When you first sign up for a policy, virtually every car insurance company on the planet will ask you who in your household is going to drive your car. If there are people you’re living with — like roommates, a spouse, or your teenagers — that will have regular access to your car, your insurance company is going to want to check them out first. Specifically, they’ll check the driving records of each person and decide if they want to assume the risk whenever that person is behind the wheel of your car. If the insurance company doesn’t like what it sees, it can exclude certain drivers from your policy.
What exactly does that mean?
Like the name suggests, an excluded driver is excluded from your insurance benefits. So, if your roommate is listed as an excluded driver on your insurance policy, your insurance company won’t fork over a dime if he gets into an accident while driving your car. Instead, you’ll be the one left holding the bag for any damages or injuries that occur.
Does that mean you can NEVER loan your car to someone else?
Not necessarily. In the car insurance world, there’s something called “permissive use”. This means your coverage will kick in if you loan your car to someone who doesn’t live in your household. (Just make sure you know exactly how your specific policy defines permissive use! A policy from one insurer may have a totally different permissive use protocol than a policy from another insurer.)
Here’s the biggie when it comes to permissive use — you can be held responsible for an accident if you loan your car to a friend for the day, even if you were nowhere near the crash site. Luckily, though, California law prevents you from being held responsible for everything under the sun. Thanks to California Vehicle Code Section 17151(a), as the owner of the borrowed vehicle, your liability is limited to $15,000 for the injury or death to one person and $30,000 if the accident causes injury or death to more than one person — assuming you meet certain legal criteria.
Bear in mind, though, that permissive use only applies to people who use your car infrequently. If you constantly loan your car to your friend down the street — and your insurance company finds out about this regular driver that you haven’t listed on your policy — there’s a good chance you won’t be covered if something goes wrong.
There’s one other very important thing to remember — here in California, you may not be entitled to ALL of your benefits in a permissive use situation. If someone else gets into an accident in your car, your coverage may only kick in at a reduced rate. You’ll need to read the fine print — or talk to your insurance agent — to see if this reduction applies to your specific policy.
What if the person you loan your car to has their own insurance?
Your insurance company will likely split the costs with their insurance company. Since your car was actually the one involved in the crash, your insurance coverage may be tapped into first — with your friend’s coverage used as a secondary type of insurance.
What if someone takes your car out for a spin without asking you first?
That’s where non-permissive use comes into play! For example, if someone steals your car, you obviously didn’t give him permission to use it. If the thief got into an accident in your car, your insurance would likely cover the damage to your car, and you wouldn’t be on the hook for any damage or injuries that occurred in the other car.
So, does this mean that you can just claim that your roommate took your car without your permission and, thus, get your benefits to kick in if anything goes wrong?
No! Insurance companies have seen every trick in the book, including this one. As a general rule, they assume that your roommate, spouse, kids, or anyone else who lives with you and has access to your keys has your permission to drive your car — whether you physically give it to them or not. So, even if your roommate takes your keys while you’re in the shower and gets into an accident, you’ll likely be liable for the damages he causes.
How do you know if anyone in your household is actually excluded from your policy?
Your insurance company will tell you. Specifically, there will be special language in your policy that explains that you will not have coverage if this person drives your car. Period. No matter what emergency or special situation arises, your insurance benefits will not kick in. There are no loopholes when it comes to excluded drivers. Once a certain driver has been excluded from your policy, the idea of permissive use goes right out the window!
Why would your insurance company bother to exclude a driver in the first place?
In most cases, it’s because the person in question has a less-than-stellar driving record. Remember, insurance is all about risk. The worse record a driver has, the bigger the risk he poses to the insurance company. If the risk is high enough — like if the person has multiple DUI’s, a ton of speeding tickets, or a bunch of at-fault accidents under his belt — your insurance company may decide that they don’t want to deal with him in any shape or form. So, they’ll specifically exclude him from your policy.
In fact, if there is any driver in your household that would prevent you from qualifying for California’s Good Driver Discount, he can be excluded from your policy. (This can actually be a really good thing for your wallet. By keeping this driver off your policy, you’ll be able to claim the 20% savings that the Good Driver Discount gives you!)
In some cases, insurance companies will exclude everyone BUT you on your policy. However, this only tends to happen with the smaller insurance companies. If you’re getting a policy from one of the “big guys”, you probably won’t have to deal with something like this. But be sure to do your homework! Read your policy carefully — or ask your insurance agent to explain the fine print to you — before you let anyone else drive your car so that you don’t end up with an expensive surprise!
What if you don’t want this person excluded from your policy?
You may not have a choice. You can always ask your insurance company to remove the exclusion, but they are under no obligation to do so. And, don’t assume that once your policy renews next year that the exclusion won’t be in place. Excluded drivers don’t “expire”. They can be listed on your policy until your insurance company says otherwise. However, once the excluded driver makes it through a couple of clean driving years, your insurance company may reconsider its position. So, you’ve got nothing to lose by asking!
What about people who have no chance of driving your car? Will your insurance company exclude them?
If you’ve got a toddler at home, he obviously isn’t going to drive your car anytime soon. So, your insurance company won’t bother to list him as an excluded driver. The same would apply if you had a disabled family member who was physically unable to drive living with you.
Can YOU choose to exclude people from your own policy?
Yes. In fact, some people choose to exclude other drivers in order to save themselves a little bit of money in premiums. After all, the less of a risk your policy is to your insurance company, the less you’ll have to pay for it!
But just like the exclusions that your insurance company makes, any excluded drivers that you list on your policy will remain there until you actually go through the process of removing them. So, if you have a change of heart about a particular driver, contact your insurance company and let them know!
What about people in your household that you WANT to drive your car?
Whether it’s your spouse, your roommate, or your 16 year-old daughter, you’ll have to physically add the driver to your policy. Depending on the amount of risk this person poses, you can wind up paying more in premiums. However, if this person is going to be using your car on a regular basis, paying a little more now can translate into some big-time protection if something goes wrong later.
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