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Question for the Money Doctors

Question submitted on May 16, 2013.

Question

Will my car insurance premium go up if my friend was driving my car and scraped another car? My friend was driving alone. I wasn''t even in the car at the time.

Answer

You take a risk when you loan a car to another. And, that risk can increase dramatically.For instance, if one of your children gets into an accident that exceeds policy limits, you are personally responsible. Generally, whoever a vehicle is registered to bears the brunt of liability. This is why I recommend that parents make sure they obtain umbrella liability insurance when their children drive. It is generally good to have an umbrella liability policy regardless of children and lending cars to friends. An insurance company will generally raise rates if they perceive the risk increases. Loaning a car to people who are not endorsed on your insurance policy would generally increase risk. You also should read the policy contract. Some policies will cover those who are not on the exclusion list. However, if the policy covers those not specifically excluded, and they later get into an accident, the friend will usually be put on the exclusion list. Most importantly, if a friend should wreck a car and exceed policy limits, they will turn to you to satisfy the liability.


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