The consequences of loaning your car to an unlisted driver can be hazardous to your auto insurance rate. Here's how you can avoid this potentially costly mistake.
Unlisted drivers are likely to cause your auto insurance rates to rise.
Let's begin with the basics. Car insurance policies provide for coverage of the car, and not the particular driver. Simply put, if someone has your consent to drive your car, if that driver is involved in an auto accident, you can expect your insurance company to cover the loss. Obviously, recovery of your damages is limited only to the coverages you selected at the time you purchased your policy. In the case of collision insurance coverage, for example, in the event that driver was involved in an at fault accident, your auto insurance would pay for your vehicle damages, excluding the amount of your deductible.
Let's clarify this a bit further. Say you loan your car to a friend who does not live in your residence. This friend is not a regular driver of your car. You just loaned it to that friend on a one time basis. If that friend is involved in an at fault accident, your insurance company will have to pay the damages - not your friend's policy.
So how will this scenario impact your policy and, more specifically, your auto insurance rate?
Collision insurance coverage does provide for at fault accidents, yet the downside is that claiming for an at fault accident is almost certain to raise your auto insurance rate even if you are the driver. The problem intensifies when an unlisted driver is involved. And that applies to all accidents, not just at fault accidents.
If you allow a friend to drive can you expect to pay a higher insurance rate? In all likelihood, yes. Insurance companies are not fond of "unlisted" drivers. The fact is, by having an unlisted driver behind the wheel, count on your insurance company to conduct a thorough claims investigation into the circumstances. More specifically, they'll be looking into the prospect that the driver could actually live in your household. And, most probably, they will also examine the driving history of the unlisted driver and they will attempt to verify if that driver has insurance of his own.
How will all of this influence your auto insurance rate? Various ways - and it's unlikely that any of them are very good.
If their investigation discloses that the unlisted driver has a bad driving history, you can be reasonably certain that this will work against you when your auto insurance rate is calculated at the conclusion of your insurance policy period. By permitting a questionable driver to operate the insured vehicle, the company is recognizing you as a higher risk. As your risk rating goes up, so does your auto insurance rate.
The insurance company will investigate the insurance history of the unlisted driver primarily to determine if that driver resides with you and was not disclosed when the policy was issued. Applying for insurance without disclosing significant risk information - including the identity of all drivers in that household - is what auto insurance policies identify as "misrepresentation". If a forthcoming claims or underwriting investigation confirms that you did not disclose all drivers in your household, it is likely that your auto insurance policy will be cancelled for misrepresentation. If that happens, the insurance company is almost certain to deny coverage for all accident damages.
The message here is that you need to be extremely mindful when loaning your vehicle. Even though it is acknowledged that once in a while you could loan your car to another driver, make certain that the driver is a responsible driver, and that he does not use your car on a regular basis. In those situations, you will probably experience a lag time in settling your claim, but you can expect the claim to be honored. On the other hand, if the insurance company can determine that the unlisted driver is someone who you obviously failed to reveal, you can expect significant consequences. Even in the event you can logically make clear why your friend was driving the car, at renewal time you can unquestionably expect an increase of your auto insurance rate. In any event, the consequences are costly.
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