Know this before lending your car

In a recent article, Kwiksure discussed adding extra drivers to your insurance policy and what you need to be aware of in regards to doing this. While this works well for people who will be driving your car on a regular or semi-regular basis, it isn't overly efficient for people who want to lend their car on a short-term or occasional basis. For example, if a friend is moving and you own a minivan, and they ask you to borrow it for the day, it doesn't make a lot of sense to sign them up as a driver under your policy, pay the premium and then remove them a few days later.

In this article, we will take a look at how car insurance works when you lend a car and provide some useful advice you should be aware of before lending your car.

Can I lend my car to friends in Hong Kong?

Like anything else you own you can lend a car in Hong Kong, there is no law against it, it's really up to you whether you want to lend your car to friends or family. When it comes to insurance, however, it is important to note that the majority of car insurance policies secured in Hong Kong do actually allow you to lend your vehicle to friends and family while still retaining coverage on the vehicle as long as certain conditions are met.

Generally speaking, these conditions will be the same for most insurance policies and are usually the same that are applied to the primary driver of the vehicle. For example, the person you lend your vehicle to must have a valid driver's license (more on this below) and they must be over the age of at least 18. Of course, some insurers may have slightly different rules. For example, some insurers may require that the person you lend the vehicle to is a resident of Hong Kong or they must be over a certain age.

Important things to remember when lending your car

If you do plan on lending your vehicle to other drivers, there are a number of things to consider before doing so in order to ensure that your motor insurance coverage remains intact while they are driving your vehicle. Here are seven:

Look at the driver's license and confirm it is valid

As you likely know, in Hong Kong you are legally required to have a valid driver's license in order to operate a motor vehicle. If you are caught without one you could be arrested and charged. And this rule extends further than you might think.

Recently, Kwiksure had a client who lent their vehicle to a friend without checking that the friend had a valid license. While the friend was driving the vehicle, they were involved in an accident that was not their fault. The result of this was that the driver was charged with driving without a valid license. This, in turn, invalidated the insurance and the driver was charged with also driving without mandatory insurance. But the police did not stop there, they also charged the owner of the vehicle. The owner also saw their insurance policy invalidated meaning they had to pay for repairs out of their pocket.

The moral of the story is that, if you are going to lend your vehicle to a friend or even a family member, it is your duty to ensure that the driver has a valid license. It is not enough to simply ask the person you are lending your car to. You should ask to physically see the license and for proof it is valid. If not, you could be held personally liable for any accidents and even charged by the police.   

Be aware that some high-end cars may have insurance limits on them

What we mean here is that insurers tend to have set clauses in their plans for cars of high value, or high power e.g, supercars. These cars usually have a strict limit on the number of drivers that can be attached to a policy and will not allow lending.

If you do lend your supercar to a driver, there is a good chance that they will not be covered should an accident happen. Therefore, it is a good idea to consult with your insurer for options around lending and adding extra drivers to your policy.

Be careful of what the person will be using the vehicle for

There is a common clause included with individual car insurance policies that will exclude coverage if the vehicle is used for commercial purposes. This extends to people you lend your vehicle to as well. If you have this clause in your policy, it would be advisable to check with the person you are lending the vehicle to as to what they will be using it for.

Essentially, if they are going to be using it to support a business e.g., driving for a ride-sharing company or delivering something, then it could be viewed that they are using it for commercial purposes, which means they will likely not have valid coverage if you have an individual plan.

Know what will happen if the vehicle is in an accident

Dealing with accidents, the police, and insurers in Hong Kong is a somewhat complicated and time-consuming process. If you lend the vehicle to someone who is then in an accident, this will add yet another layer of complication to the process.

First, you as the owner of the vehicle are going to have to likely prove that you did, indeed, lend the vehicle. If you can, then the insurer should process the claim without much of a problem. It may take a little longer to investigate the accident, however. Where it gets tricky is if the driver at the time did not have a valid license. As we stated above, if you did not check this then you will be held liable and likely charged.

Read all terms and conditions before using a lending app

Lending apps are becoming increasingly popular in Hong Kong, due in part to the price of owning a car in the city. After all, an app that allows you to lend your car out can be a great way to offset costs.

What is good about these apps is that some of them actually work with an insurer to offer coverage for drivers who borrow your car. The insurance secured by the driver will override your insurance, leaving your coverage separate from any accident and repairs that happen while the car is rented.

On paper, this sounds perfect. However, in practice, there could be an issue with this, primarily in the wording of the contract the driver secures and how the car is used. If, for example, you use the app to lend your car to someone who then uses it for commercial purposes, the insurance may not cover this, meaning you will be held liable should anything happen.

It is important to read any potential documentation before agreeing to lend the vehicle, while also checking the driver's documentation when you do lend the car.

Don't try to cheat the system

Imagine that you have two kids who will be turning 19 or 20 soon and starting to drive regularly. Adding them to your policy can increase your premium dramatically, to a point where having a car may not seem worth it at all. So, what do you do? You just say that your kids are borrowing the car and your premium doesn't go up! It works right? Wrong, if an insurer finds out that there is a regular driver of the car who is not listed under your policy as a regular driver, they can and will end your coverage.

This, in turn, leaves you without coverage, which is illegal in Hong Kong and means you could be charged. While it may seem like insurers won't really find out, they eventually will (that is a topic for another article).

It is better, therefore, that, should you have regular drivers who will be driving your car, you contact Kwiksure before they start driving your vehicle. We may be able to help find a way to get regular drivers covered without a huge increase of your premium.

Review your insurance

Finally, it is important to review the terms and conditions of your car insurance plan. While many plans in Hong Kong do cover lending your vehicle to other drivers, some plans limit this and others may not cover this at all. Other plans yet will attach conditions to lending e,.g., the vehicle can't be used for commercial purposes.

If you are looking to learn more about lending your car and finding insurance that will allow this, contact Kwiksure today.