I had to empathize with my friend. Poor man: out of the kindness of his heart, the man lent his vehicle to a relative. And then his relative was in a serious accident, resulting in two totaled vehicles: the car he had lent my friend and the truck he crashed into!

For those uneducated on the subject, when you lend your car to someone else, the insurance industry refers to that driver as a permissive driver. If a permissive driver causes an accident, this is how insurance companies will respond.

Car insurance and an accident caused by a permissive driver

If you gave permission to someone who is not listed as a driver on your auto insurance policy and that person causes a car accident, the procedure generally goes like this.

1. In the event the driver and car owner have separate auto policies, the car owner’s insurance will pay for damages under the collision portion of the coverage, after the policyholder pays the deductible required.

2. If there is significant property damage, as well as bodily injury to the other driver or their passengers or pedestrians, the car owner’s insurance will cover the damages and legal fees of an associated lawsuit filed against the car owner. Insurance payments are subject to policy limits. If the car owner’s policy limits lead to an outstanding balance, the driver of the loaner car can seek compensation from their own insurance company to receive any remaining funds owed for damages. If the car borrower is injured in an accident he or she caused, the related payments would generally be covered under the Personal Injury Protection portion of your auto policy. In the event that the driver does not have this insurance protection, but the car owner does, the coverage will pass through that.

3. What if the person who borrowed the car was in an accident but did not have a valid driver’s license? In this case, there is a good chance that coverage will be denied. Many insurance companies exclude coverage for an unlicensed driver. If this occurs, the car owner, you, and the “permissive driver” will be responsible for paying all damages, as well as court fees, if any.

But in addition to the related aggravation and potential wallet depletion, policyholders can find their premiums at policy renewal.

Of course, anyone who works with an experienced independent agency designated to do business directly with many of the leading underwriters has the advantage of working with the advantage of the market to find the lowest premium available under the circumstances.