When you lend your car, think about the insurance

By Features Consumer Reports

Do you lend your car to friends, family, or even strangers who hook up with you through a car-sharing smart phone app?

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If you do, remember that you're also often lending those other drivers your car insurance, and that could have potentially negative consequences on your finances, if your vehicle is involved in a crash

For starters, an at-fault accident by your driver could result in an increase in your insurance premiums. Your car could be damaged and temporarily unusable until repaired, or worse, it could be totaled, which does not necessarily mean you'll get a brand new replacement car. Rather, you're more likely to get the significantly lower cash value of a used vehicle—minus your deductible, minus any remaining balance due on your car loan and payable to your auto loan holder.

Most significant, a 3,000-to-8,000-pound vehicle in motion can cause a lot of damage to people, other vehicles, and property, and you're typically on the hook for that even if you're not behind the wheel. 

Whether you lend your car to help a friend in need or to help the environment (and make a few bucks) through a car-sharing service, here's how to reduce the chances your good deed will cost you more than you bargained for in five car-sharing situations.

1. Occasionally lending to a friend or neighbor. In general, car insurance covers you and your car when your friend borrows the vehicle from time to time or in an emergency. But this can vary by company and state, so before being a nice guy, be smart and check with your insurer regarding your specific policy language on this point.

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Of course, you'll want to make sure the borrower is properly licensed, isn't prone to car accidents, and doesn't have big negatives such as DUI or speeding tickets on his or her driving record. You're best off if your friend also has his own car insurance, as well, so his carrier can pitch in or maybe entirely cover the damages.

Your auto insurer might boost your premiums after you've had a chargeable at-fault accident. Read our advice, "Should You Report That Fender Bender?"

2. Regular lending to a friend, roommate, or significant other. If you're essentially sharing your vehicle all the time, your insurance will cover you, as with occassional borrowers, but you should notify your insurer and list the other driver on your policy. That will also give you a good excuse to prod the other person to share the cost of the insurance and vehicle upkeep. It's great to be a supportive friend, but don't be a chump.

3. Use by an extended-stay houseguest. This is a great way for your out-of-town guests to save money by avoiding a rental car, which could be as much as $600 a week. Same rules apply as No. 2 above. 

4. Handing the keys to your–Ulp!–teenager. As soon as your son or daughter gets a learner's permit or license and climbs behind the wheel, you need to list him or her on your policy, so your insurer can properly price your new increased risk. Expect your premium to increase by 50 to 100 percent, because new, inexperienced, hormone-fueled drivers have a higher crash rate.

5. Renting to strangers through a car-sharing app. Your personal insurance policy typically won't cover you or your car when you rent out your vehicle through car-sharing services such as RelayRides.com, Getaround.com, and FlightCar.com. So these companies provide car insurance, generally $1 million for the liability, plus collision and comprehensive for your car. But make sure you fully understand all the details of that insurance.

Pay particular attention to the uninsured/underinsured motorist insurance. Typically, companies offer only the minimum UI/UIM required by your state, which might be only $20,000 to $50,000—way below our recommended standard of $300,000 for bodily injury, and way, way below that impressive $1 million liability that covers other people and property injured by your vehicle.  

UI/UIM is important coverage to have, because the proportion of uninsured drivers varies from state to state (from an estimated 4 percent in Massachusetts to a whopping 26 percent in Oklahoma), and your liability insurance protects damage that you or your vehicle cause to others, but not injuries and property damage done to your vehicle and its occupants by an uninsured driver.

—Jeff Blyskal

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