What is secondary auto insurance coverage?

Secondary car insurance covers you if your primary insurance company will not pay for all of your repairs. Secondary car insurance policies can be useful when a car is frequently borrowed.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: May 4, 2022

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Here's what you need to know...

  • Secondary auto insurance coverage will help to protect you if your primary insurance company will not pay for all of your repairs
  • It is smart to consider another person’s insurance coverage before you lend him/her your car
  • Many credit cards offer free rental car insurance

The differences between primary and secondary auto insurance coverage are very distinctive. To understand these two terms, you should first grasp the basics of when they apply.

Begin with the way you can use each type of coverage and start with the definition of the terms primary and secondary.

This is how the auto insurance industry makes restitution and compensation during the claims process. Just because you own a car with your own insurance does not mean that you should not consider the ways secondary coverage can help you.

Primary auto insurance is, by definition, specific to the owner of the vehicle, while secondary auto insurance coverage kicks in after a maximum payout.

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Choosing Coverage Levels

You can choose secondary auto insurance a couple of different ways, including going with a completely different auto insurance provider.

Some companies offer this type of coverage under an umbrella policy.

These plans offer a security blanket. You select your premium based on a dollar limit. If you need extra money towards vehicle damage, you can go right to your back-up.

This option is also perfect for collisions that cause major injuries because healthcare costs continue to soar.

If you only have a basic auto insurance policy with limited personal injury protection, you may need the added resources.

Another way to pick your additional auto insurance coverage is to work with your current carrier.

One example where you can utilize a secondary vehicle insurance policy is if you let people borrow your car often.

If you have a close friend or relative that does not own a vehicle, you may offer yours frequently. Perhaps you work from home and do not require the use of your car on a daily basis.

Rather than seeing a friend or family member face a long commute by bus or train, you may allow them the use your car during the week.

If the person driving your car also purchased an insurance policy, they can help share the cost of repairs if they get into an accident. This is when a secondary auto insurance policy comes in handy.

You will feel more secure in lending out your vehicle, especially if you have a basic policy.

The second scenario surrounds friends or family members who have their own cars and insurance but drive yours instead. Maybe you have a nicer model with plenty of extras and theirs is less expensive but still gets them around.

Everything goes well each time they borrow your car, except this time, they swerve to avoid hitting a pedestrian and slam into a mailbox causing major damage.

You will need to file the claim to get your car fixed; however, it does not seem fair for you to bear the extra burden.

Some cards provide secondary coverage in the driver’s country of residence (where you might be covered by your regular auto policy) and primary coverage abroad. As a general rule, secondary coverage abroad will effectively act as primary coverage, since most personal car insurance policies will not be applicable outside the United States. Similarly, if you don’t own a car and therefore don’t have car insurance, even secondary coverage will essentially act as primary coverage in the U.S.

Instead of paying for the entire bill yourself, you can use your friend or family member’s secondary policy to pick up the slack when your car insurance company issues a minimal payment to you.

In fact, if their auto insurance provider pays handsomely, you can request the difference from the driver in cash.

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It Does Not Cover Everything

Primary car insurance coverage levels often include options such as towing. However, if you are not the driver when an accident occurs, you may receive a hefty towing bill for removing your car from the scene.

This cost is something many people never consider, but it is worth pondering if you allow others to use your car regularly.

Depending on where you reside, you could spend a minimum of $90 to have a vehicle towed to your home or closest repair shop.

If you live in a large city similar to Boston, it could cost more, especially if the driver spends more than a few minutes getting everything in place. The towing regulations in Massachusetts also consider the weather conditions.

If snow removal is required, the process can be delayed.

This difference is not the only variation between traditional and secondary policies but is certainly is one that can cost you directly out-of-pocket. If you do decide to loan out your car, give the driver your roadside assistance card when you hand over your keys.

Coverage Differs Widely by State and Insurer

According to Lawyers.com, you should check with your state to see how things pan out if you have an accident with a friend or relative’s car.

In the majority of the states, primary and secondary auto insurance coverage differ widely.

The regulations as they relate to these types of claims depend on a number of factors, including negligence and permission. Negligence refers to you as the owner of the vehicle loaning your car to a high-risk driver.

They may not have enough experience or maybe they had too much to drink. Possibly, they do not even have a valid driver’s license. Any of these reasons can make you as the titleholder personally responsible for any negative events, and this includes a collision.

These situations can cause your insurer to deny your secondary claim, which leaves you financially responsible for all injuries and repairs, although you were not present at the time.

If you do not give permission to someone and they take your car anyway, this is considered theft by the car insurance companies.

If you do not notify the proper authorities, you may receive a denial when you place your claim.

The Claims Process

The claims process is very different with a secondary car insurance policy because whoever causes the damage must submit their claim first, and then the wait begins.

Unlike the conventional method of gathering documents and forwarding everything at once, the results from the primary auto insurer dictate the next step.

If someone else drives your car with his or her own car insurance, they should still work with you during the entire course of action.

Remember, they have the facts, so you need to include them in everything. Make sure they are with you when contacting your insurance company.

Also, they should make preparations on their end, which includes documenting your steps to ensure that they have everything synchronized.

Once you hear from your car insurance company, they should move quickly. Since they caused the damage, they have an obligation to you to get you the money you need to finish the necessary repairs.

The same is true if you damage someone else’s vehicle. The process works both ways, so remember where the fault lies and remain accommodating.

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Renting a Car with Your Credit Card

American Express and other credit cards like Visa from Capitol One offer the benefit of rental car insurance free of charge. It is an excellent option when you need to rent a car.

Many times, people require this level of automobile insurance if they use the services of rental cars because they can waive the extra expense.

It is always important to read your credit card’s fine print concerning rental car coverage because the insurance from the car might be secondary insurance only.

Depending on the type of vehicle you rent and the length of your agreement, you will probably want the security of insurance.

However, if you fail to budget your finances accordingly, you could see your original fee rise quickly when you add the rental company’s insurance coverage.

Credit card companies that offer this type of service assist their customers by acting as temporary auto insurance providers. The card user doesn’t need to worry about theft or damage because they receive protection from these events.

Also, rental car coverage is automatic as long as you use your credit card during the initial transaction.

If something occurs during the time you have the rental in your possession, you simply make a telephone call to the correct department, and they begin the claims process on your behalf.

This is something your primary auto insurance company cannot accomplish. While they will certainly aid you in the procedure, it will not be as simple as this is. You may suffer negative implications because of the claim.

Because they will make a payment to the rental car company, your history with your auto insurance company is affected and your rates or status may change.

Every Car Owner Has Specific Obligations

Owning a car comes with specific obligations, and many do not understand the importance. In addition to remaining safe on the road, you must also ensure that you have the financial stability to pay for repairs if necessary.

You should consider purchasing a secondary car insurance policy for the unknown issues that occur to virtually everyone at some point.

Check your insurance coverage: Before renting a car, it is a good idea to check how much rental car coverage is available with your credit card. It is also important to find out if your credit card company offers primary or secondary insurance. Many credit cards only offer secondary insurance, which may be limited as to how much it covers.

You also have a responsibility to use wise judgment when you pass your keys to someone.

If you are not 100 percent certain that the driver will respect your vehicle and the laws of the road, then you need to deny their request to borrow your vehicle.

Bear in mind that although their insurance will assist with the repairs and medical bills, you still will have an accident and claim on record with your personal car insurance provider. You may lose any special discounts that you have.

If you need a car rental for multiple months, your credit card coverage typically won’t apply.

Additionally, you could also face serious issues if the accident spirals beyond a fender-bender.

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