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Lending your car to a friend or relative? Check your insurance first

Sam Ficek

Your insurance might cover you differently if a young, inexperienced or unlisted driver is behind the wheel. Beware of higher excesses or even gaps in cover.

How many times have you let your friend or family member borrow your car? I know it’s common practice among my friends, and I have a hunch many Aussies would be quick to lend their keys to a loved one too.

But there’s one thing I always ask my mates when I borrow their car. Am I covered if I get into an accident and how much will the excess be? I know, I sound like a stickler, but heaps of car insurers apply additional excesses for all sorts of reasons and some withhold cover altogether.

The following are some of the main reasons for an additional excess:

  • Drivers under 21
  • Drivers under 25
  • Drivers who have held their full licence for less than two years
  • Drivers who aren’t listed on the insurance certificate

Not every insurer will apply every excess. For example, I’m with NRMA. My basic excess is $850, but if someone under 25 is driving my car and gets into an accident, there’ll be an additional excess of $1,600. If an inexperienced driver is behind the wheel, there’ll be an additional excess of $400.

As someone nearing 30, I don’t have too many friends in the under-25 age bracket, and I have no younger siblings to worry about. Yes, the $1,600 excess is a big one, but I’m fairly certain I’ll never have to pay it, and NRMA was the cheapest insurer I could find for my car, so I’m happy.

Gaps in cover

Additional excesses aren’t the only thing to watch out for. Take Budget Direct for example. The insurer charges additional excesses for anyone under the age of 21 or 25 as well as inexperienced drivers and unlisted drivers. But that’s not all.

Budget Direct won’t cover any member of your household unless they are listed on your policy. That means if you live in a share house with friends, they won’t be covered for driving your car unless they’re listed on your policy. If you live at home, your parents, siblings or kids won’t be covered unless they’re listed on your policy.

Of course, there’s nothing stopping you from adding them to your policy. It’s just a way for Budget Direct to get a clearer picture of who’s driving the car on a regular basis, but it’s definitely a detail to remember if you’re ever handing your keys over.

Deliberate restrictions

While restrictions can seem frustrating on the surface, they can actually be a good thing. In fact, lots of insurers offer drivers the ability to apply voluntary restrictions in exchange for a lower premium.

With Budget Direct, you can choose to set your insurance so it never covers anyone under the age of 25 or 21. If no youngsters are going to be behind the wheel, this makes complete sense. It’ll bring the cost of your premium down, without having any impact on your life.

Some insurers also let you secure cover for listed drivers only. While this might seem pretty restrictive, it’s a great idea for super safe drivers who never share their car. Again, it can lead to serious savings for no real sacrifice.

Being aware

Don’t get me wrong, this article isn’t a lament about sneaky fees. Insurers are generally pretty upfront about additional excesses, although you should always read the PDS carefully.

However, additional excesses and gaps in cover can be quickly forgotten. Hold your policy for a few years, or even a few months, and most people will forget what the specifics are.

That’s why handing your keys over can lead to serious repercussions. Even a little accident could leave you out of pocket or, worse, arguing over money with a loved one. Of course, there are ways to avoid it.

Make a note of your restrictions

When you buy your policy, make a note of the restrictions. Stick them on your fridge or put them in your phone. Just have them on hand so if someone asks to borrow your car, you can be sure what the conditions and additional excesses are.

Tell your friends and family

Unless you’re willing to cover the cost of the excess, be upfront with friends or family when you lend them your car. They’ll have all the information they need to decide whether it’s worth the risk, and they won’t be blindsided by a huge bill if something goes wrong.

Review your insurance every year

Instead of simply renewing your policy every year, compare your car insurance options instead. You might be able to find a better deal, with fewer restrictions, so you can lend your car without any huge worries.

Article provided by Nicola Middlemiss, a senior insurance writer at Finder.

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