We get a lot of questions about car insurance basics, as all the information out there is more aimed at “price” rather than coverage.
With all the money we spend on insurance, why don’t high schools require a class on basic insurance principles (and credit and mortgage while we’re at it)?
Here are the basics to keep in mind when you are considering if insurance is for the car or the driver.
What Coverage Did You Buy?
Insurance would be for the driver if you purchased a liability-only car insurance policy. Auto liability coverage protects the vehicle owner (or any vehicle operator) against bodily injury and property damage (other people’s property) they cause to another party as a result of negligence.
So if you or a friend/family member drove your car, and damaged someone else’s property or hurt another person, car insurance would protect the at-fault vehicle owner from financial losses arising out of the liability.
But there would be no coverage to repair the vehicle the “at-fault” driver operates under a liability-only policy. So if you total your car, you’d be out of luck, which brings us to physical damage coverage.
If you cause an accident that results in bodily injury to another person and damage to your own car, you would be protected from liability and your car would be protected/repaired.
“Insurance Follows the Vehicle”
A common statement made by insurance professionals is, “the coverage follows the vehicle.”
If a particular vehicle has coverage, i.e. listed on an in-force insurance policy, the coverage is in place no matter who is driving the vehicle, even someone without their own car insurance.
For example, if a friend borrows your vehicle and crashes into another car, your car insurance policy would respond first. And if your friend also has coverage, his or her insurance would come into play if your liability limits were exhausted.
In other words, if the car accident is particularly nasty, it may require money from both policies.
This principle is often misunderstood, which may lead people to ask if “insurance is for the car or the driver.”
Broad Form Policies
There are policies available, known as “broad form” or “restrictive” forms, that only offer coverage for the person listed on the policy.
Broad form policies simply provide liability-only coverage for a named operator, not a specific vehicle.
So if someone operates your vehicle, and doesn’t have their own insurance in-force, you’ll be liable for any damages.
That’s why you may want to avoid these “cheaper” policies if you are attempting to use them to save insurance premium dollars when, in fact, there are household members who operate the vehicle in question.
They have lead to several lawsuits and are currently under review in many states to determine if they satisfy the requirement for state mandatory minimum car insurance coverage.
Contact your insurance company or independent insurance agent if you have any questions about your particular coverage.