In most states, your car insurance doesn't automatically cover every traffic accident that involves your vehicle. Policy terms and state laws vary, but your car insurance typically covers drivers who are named on your policy, most household members, and "permissive users." A permissive user is a person who has your permission to drive your car, but isn't listed on your insurance policy.
Read on to learn more about who a permissive user might be, and the basics of what's sometimes known as "permissive use" coverage.
The people who are specifically listed on an insurance policy are called the "named insured." Liability policies typically cover named insureds no matter what car they are driving.
Spouses of the named insured are typically covered on liability policies no matter what car they are driving, even if the spouse isn't specifically listed on the policy.
Other licensed drivers who are related to the named insured and living in the same household are also covered. Household members can be related by blood, marriage, or adoption.
If you have a roommate or a legal ward or foster child who you want to be covered by your automobile insurance, you should check with your insurance agent to see if that person will be covered as a household member. If that person isn't considered a household member, you will have to specifically list that person as a covered driver on your policy.
Permissive use in an automobile insurance policy means that you give a person—who is not specifically covered by name or as a household member—permission to drive your car.
For example, if you allow a friend to borrow your car, that is permissive use. You have given your friend your permission to use your car. Not all automobile insurance policies cover permissive use. Some policies that cover permissive use might provide only limited coverage for permissive users, or require increased deductibles if a permissive use car insurance claim is made.
So, before you lend your car to even your best friend, you should take a close look at your insurance policy to see exactly what coverage it provides for permissive use situations. If your policy provides limited or no coverage for permissive use of your car, then you might want to think twice before letting anyone borrow your car.
If your friend borrows your car and gets into an accident, it's possible that your friend's own car insurance policy might cover any damages, but that's not guaranteed. The best rule is to know the facts before you lend out your car and read your policy first.
Even if your insurance policy covers permissive users, it might not cover you if your car is used for business purposes, unless you have a specific endorsement for business use on your policy.
You might think this point is no big deal because you don't drive your car for business. But what if your friend is self-employed and borrows your car to make a business delivery or for a rideshare side hustle? If your policy does not specifically cover business uses by permissive users, you will have no coverage if your friend gets into an accident in your car while driving for a business purpose. This is all the more reason to read your policy carefully.
A second exception to permissive use coverage applies to unlicensed or inexperienced drivers. If you lend your car to an unlicensed driver (hopefully because you didn't know that the person had no driver's license) and that person gets into an accident, your insurance company will almost certainly try to disclaim (deny) coverage.
If you lend your car to an inexperienced driver, it's possible that your insurance company will try to deny coverage. You might think that's unfair, but insurance companies argue that they determine your insurance premium based on the driving records of the people named on the policy. If they knew that a person with much less driving experience than you would be driving your car, they might have increased your premium.
The message here? Always be careful about who you lend your car to. Don't be shy about saying that you just can't lend out your car for insurance reasons.
If you can't figure out the fine print of your automobile insurance policy (or any insurance policy), get help. Bring your policy to your insurance agent with a list of questions and have them sit down with you and review the details of the policy, especially when it comes to covered drivers and covered vehicles. Insurance policies are notoriously unclear and difficult to understand. Translating the fine print into plain English is a big part of your insurance agent's job.