Ownership and Insurance: The Risks of Not Putting a Vehicle in Your Friend's Name
When buying a car for a friend, it is crucial to understand the legal and financial implications of the vehicle's title. This article explores the potential consequences of keeping the title in your name, especially if the friend gets involved in an accident without appropriate insurance coverage.
Understanding the Legal Context
In many U.S. states, if you own a car and your friend is involved in an accident, your name being on the title can make you liable. Even if the friend has insurance, your personal insurance company won't cover the damages because the vehicle isn't insured under your policy. This situation can be further complicated if the friend's insurance does not defend you, as you are not a party to that policy.
The Importance of Proper Title and Insurance Management
The article emphasizes the importance of titling the vehicle in your friend's name, including you as a lienholder. Additionally, you should be named as an additional named insured on the friend's insurance policy. This can mitigate the risks associated with the car's ownership.
However, it is crucial to ensure that the car is registered in your friend's name and not yours. If the car is registered in your name, take steps to have it re-registered in your friend's name. Consulting with an insurance attorney who is current with local rules is highly recommended to navigate these issues effectively.
Insurance Considerations and Legal Precedents
When it comes to insurance, the primary concern is ensuring that the vehicle is legally driven. Most states require that any car on the road be insured. If you buy a car for a friend and keep the title in your name, you may still be liable for any accidents, even if your friend has insurance. This is because the insurance company that you are insured with does not cover that specific vehicle.
Your car insurance company will not be sued, but you will be held responsible. It is imperative to ensure that the car is insured under your friend's insurance policy, especially if the friend uses the car.
Final Steps and Recommendations
If you are worried about the financial implications, it is wise to be listed as a lienholder and ensure the friend compensates you for the insurance costs on a regular basis. Alternatively, you can take out an insurance policy for the car in your own name and have your friend reimburse you for the monthly premiums. However, you must remember that you cannot avoid liability for damages caused by a car you own unless you can prove it was stolen.
Car insurance primarily covers the vehicle, not the individual. Therefore, getting driver-only liability insurance is insufficient for driving another person's car. Unless the car is insured, driving it can result in personal liability for any accidents.
In conclusion, it is essential to understand the legal and financial implications of vehicle ownership and insurance when lending a car to a friend. Proper steps, including titling the car in the friend's name and ensuring appropriate insurance coverage, can prevent potential complications and legal liabilities.