If your roommate borrows your car and causes an accident, who pays what? If you both have auto insurance, your insurance will pay first and you’ll be responsible for your deductible. Your auto insurance policy insures your vehicle plus you, any relative, and anyone else using your car if the use is reasonably believed to be with your permission.
On the other hand, if your roommate causes an accident that results in serious bodily injury and property damage to another person, the actual driver’s policy will cover the bodily injury liability and the car owner’s liability covers property damaged caused by his or her car. As owner of the car, your liability insurance also covers the cost of your legal fees in the event you are sued, but if your liability limits are exceeded, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage will not pay for damages beyond the limit for which you are insured.
If you lend your car to a roommate who does not have insurance, you are opening yourself up for trouble. If the damages your friend causes exceed your insurance policy limits, the injured party can come after you for medical and property damage expenses.
What if your roommate drives your car without your permission? You’re likely not to be held responsible for the damages because your roommate borrowed you vehicle without your knowledge. In this case, your roommate’s insurance will kick in first. If your roommate isn’t covered, you will need to use your collision insurance to cover the damages to your vehicle, and your liability coverage will cover damage to other’s property. Unfortunately, the insurance company will assume your roommate has permission to use your car unless there are clear indications that you denied permission or there are extenuating circumstances, such as a drunk friend takes your car without your knowledge.
If your car is stolen and then involved in an accident, you will not be held responsible for damages done to other people and their property, but you will probably have to use your collision insurance to pay for the damage to your car. In the unlikely event the thief has auto insurance, his company will not pay for his criminal act.
Regardless of the scenario, it is wise to understand your insurance policy and exactly what it covers and when. Just as important, exercise common sense when loaning your car to roommates, friends, and relatives.