Automobile insurance covers both cars and drivers named on a policy. However, since both are covered, insurance liability can get quite confusing when an insured person drives a car that is insured but under a different policy. If an accident occurs in this situation, coordination of benefits rules generally, but not always, go to the car's insurance first and the driver's insurance second. There are several special situations.
The general rule of thumb is that insurance follows the named vehicle, not the driver. However, your insurance may be liable in certain situations as a third party if you have an accident. For instance, if you are driving a friend's insured vehicle and have an accident, his insurance covers the wreck first. If his insurance benefits are exhausted, you may be able to get further compensation from your insurance company. Note that insurance claim limits will not extend beyond the limits of the first insurer. In other words, if your friend had liability only but you had full coverage on your vehicle, claim settlements cannot extend beyond no-fault limits.
If you have insurance but the other person's car does not, your insurance is unlikely to cover you. For this reason, you should determine for yourself if insurance covers the other person's car. If you are in doubt as to whether his insurance is adequate to cover your driving, speak to your insurance company.
If you rent a car, your insurance will cover you up to the limits of your policy. However, if you have a liability-only policy, the rental company will require you to purchase collision insurance either through them or through your own insurer. Compare costs before deciding.
Some credit card companies offer collision insurance if you rent the car using their card, but if you choose this option be certain to get the insurance terms in writing.
In any situation where you are unsure of your personal liability, check with your car insurance company. Not only will it be able to answer your specific question, it will also have a record that you contacted them regarding it. This will enable you to make a case if they deny any resultant claims.
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