You may have seen the term “permissive use” in your insurance policy, or have heard it used in a conversation with your insurance carrier. But, what does it mean? And why is it so important?
Before defining permissive use, it’s critical to understand the basics of the structure of an insurance policy. Car insurance generally only covers the “named insured” on a policy. So, if your name is the only name listed on the policy, then that means the insurance policy only covers you.
However, some policies not only cover the named insured, but also “household members.” Household members are defined as people who are related to you through blood, marriage, or adoption. To find out who “household members” are, look to the definitions page in your insurance policy. The definitions page specifically illustrates who is and who is not considered to be a household member. Knowing who is covered on the insurance policy is important, because if you are to lend your car to someone in the house who is not specifically covered by the policy, insurance may not cover him or her in the event of an accident. If you have a specific person in your household that is not a household member, you may want to consider adding them to the policy.
This brings us to the issue of permissive use. Permissive use means that you “overtly or tacitly” give permission for another person, who is not specifically covered in the insurance policy, as a named insured or household member, to operate your car. This becomes important in the event of an accident. If your policy does not provide coverage for permissive users, your friend may not be covered by your insurance in an accident that occurs when they drive your car.
So, what should you do when your friend asks to borrow your car? Be cognizant, and ask questions:
- Does my insurance cover permissive use? Check your policy, and what is covered in permissive use situations. Be careful; some policies limit coverage, or provide no coverage at all for permissive use.
- What is your friend’s insurance coverage? Know how your friend is covered by his or her insurance policy. Your friend’s policy may not cover accidents in a borrowed car. Or, your friend might have coverage, but it is extremely limited. Either way, both circumstances should give you pause before allowing your friend to borrow your car, especially if you have limited or no permissive use coverage under your own policy.
- What is your friend’s level of driving experience? This is one of the exceptions to permissive use coverage. Even if you have the coverage, the insurance company can still deny it. The insurance company may try to argue that they issued the insurance policy and the premiums to the named insured, based on the named insured’s driving capability, not your friend’s, and therefore, the insurance company should not have to cover an accident by an unforeseeable driver.
What is the main takeaway of this article? Understand your insurance policy, gather facts, and evaluate situations carefully. Do not be afraid to say “no,” and explain the reasons why to your friend. Your job is to not only protect your friend, but to also protect yourself from insurance disasters.