What Insurance Covers a Loaner Vehicle?

Driving without insurance can be a nerve-wracking experience, not to mention illegal in most states. When you drive your own car you have the peace of mind that your insurance policy will protect you in the event of an accident. But if you need a loaner vehicle, either while your car is being repaired or if you don't have a car but borrow one temporarily, you'll need to make sure you have insurance from one of several possible sources before you start driving.

Most auto insurance policies cover a loaner that you drive. Insurance policies refer to loaners as temporary replacement vehicles. Even if your insurance doesn't pay for the cost of a rental car, it still might cover any claims you make following an accident in a loaner or rental vehicle. One drawback to coverage through your existing auto policy is the fact that if you make a claim, you'll likely see your rates increase long after you get your own car back.

Businesses that lend you a car, such as dealerships and independent auto shops, carry insurance that might cover the loaners they supply to customers. These policies range from basic liability insurance that meets your state's minimum requirements to more complete coverage that includes comprehensive and collision coverage. If you make a claim against the lender's policy, the insurance company may subrogate the cost by asking your auto insurance to pay for some or all of the claim, which may affect your rates.

If the vehicle lender is a friend or family member, then the car's owner probably has insurance that covers you while you drive it. Most standard policies apply not only to the vehicle owner but also family members listed on the policy and anyone else who the owner allows to borrow the vehicle. In this case you won't have to worry about your own auto insurance rates, and you won't even need your own policy to drive. But any accidents you cause will affect the owner's rates.

One option for avoiding any damage to your auto insurance or someone else's while you have a loaner is to take out a temporary insurance policy. Temporary policies are available from most major insurance companies and charge by the day, usually up to a 30-day maximum. Temporary insurance costs more than a standard policy but your driving record won't affect what you pay, and if you make a claim it won't factor into your insurance rates with your full-time auto insurance company.