Loaning a car to someone else may seem generous, but it is a risky decision. Many people in New York have confused notions about how insurance law covers drivers of borrowed cars, and it often leaves vehicle owners holding the bag for expensive accidents. If a friend borrows one's car and has an accident, whose insurance covers it?
Car owners often have the mistaken idea that their auto insurance covers them, not their automobile. In other words, they believe that a friend who has an accident in a borrowed car will be covered by his or her own policy, not the policy of the car's owner. This is not true. The owner of the car is responsible for any damage or injuries that result from the accident. The driver's insurance may kick in if the owner's liability coverage is not enough.
The owner of the car will be responsible for paying any deductible. He or she will also face the real possibility of an insurance rate hike because of the accident claim. Fortunately for the car owner, any traffic citation the driver gets will not affect the owner's insurance or driving record, but the accident will likely end up costing the owner in some way.
While vehicle owners are the only ones who can decide if it is worth the risk to loan their cars to people who are not on their insurance policy, insurance law is clear that the owner will be held financially responsible for any accidents involving his or her vehicle. New York vehicle owners are advised to carefully read their policies and understand the exclusions and limitations. Additionally, it is wise to be discerning about those to whom one lends a vehicle.
Source: thebalance.com, "If Someone Borrows My Car, Are They Insured?", Emily Delbridge, Accessed on March 23, 2018