Must-Read for Borrowing a Car | Third-Party Liability Insurance: Does it Follow the Car or the Person? The Latest Guide to Third-Party Liability Insurance in 2025
When lending their cars to friends, many car owners worry about insurance and legal liability in case of an accident. In particular, many people ask, "Is third-party liability insurance based on the car or the person?" This article, based on the latest car insurance market information in 2025, will help everyone quickly understand the insurance coverage and precautions when lending their car, making lending your car more worry-free
What is third-party liability insurance? Does third-party liability insurance cover the vehicle or the person involved?
Third-party liability insurance (referred to as "3-party insurance") is a basic insurance mandatory under Hong Kong law for every vehicle. It protects the vehicle owner's legal liability for damages to third parties (personal injury and property loss) caused by a vehicle accident. If you want to cover losses beyond third parties, such as damage to the vehicle itself, medical expenses, etc., it is recommended to purchase "comprehensive insurance". More comparative information on 3-party insurance and comprehensive insurance canbe found on this blog.
Please remember that third-party liability insurance is tied to the vehicle, not the person.When you lend your car to a friend, you are essentially lending it out along with the insurance. In the event of a traffic accident, the responsibility for related compensation or deductibles ultimately rests with the car owner. In Hong Kong, most car insurance policies cover coverage when a vehicle is lent out, but some policies may include restrictions or additional terms. Please refer to the "Precautions" section below for details. Therefore, before lending your car, be sure to clearly understand the risks you may be incurring.
As forthe specific liability for compensation, it will be allocated according to the proportion of fault in the accident, usually determined through negotiation between the two parties or a court judgment. The outcome may be one of the following three:
1. The borrower shall bear full responsibility;
2. The borrower of the car shall bear partial responsibility;
3. The accident was caused entirely by another third party
Depending on the allocation of liability for the accident,the car owner may need to bear part of the compensation, pay a down payment, or seek compensation from other responsible parties.
Accumulated calculation method for base fee
Most car insurance plans on the market currentlyrefer to borrowers as "unregistered drivers," meaning those not designated as drivers on the policy. Unless otherwise specified in the policy,unregistered drivers generally enjoy coverage, but they need to pay an additional prepayment fee. It's important to note that this prepayment fee is cumulative. For example, if the borrower is under 25 years old or has less than two years of driving experience, the corresponding prepayment fee for each situation will be added to the initial compensation payable by the car owner. This fee must be paid by the car owner upfront.
For a simple example, suppose a car insurance policy has the following deductible:
Basic deposit: $1,000
Young driver: $1,000
Inexperienced driver: $1,000
Unregistered drivers: $1,000
The car owner (policyholder)'s 20-year-old son had just obtained his driver's license and was involved in a traffic accident while driving the insured vehicle. The son was not the registered driver on the policy. If the car owner wants to file a claim for this accident, he must first pay the aforementioned four deductibles, totaling $4,000. This $4,000 includes the basic auto insurance deductible plus the fact that the son was a "young driver," "inexperienced," and "not registered driver on the policy" at the time of the accident. Therefore, all four deductibles will be added to this claim before the insurance company will pay the remaining amount
Five essential checks to do before lending your car to a friend in 2025
To ensure the safety of borrowing a car and protect your rights, we recommend paying attention to the following points before borrowing a car in 2025:
• Verify that the borrower's driver's license is validto avoid insurance voiding and legal liability due to unlicensed driving.
• Clearly understand the policy terms, especially the eligibility restrictions for borrowers and the scope of insurance coverage.
• Inquire about the intended use of the car. Insurance often does not cover private cars used for commercial purposes such as transporting goods for payment or providing ride-sharing services.
• Expensive vehicles have special terms and conditions; some high-priced or high-horsepower vehicles may have restrictions on the number of drivers or may not be allowed to be borrowed.
• The procedure for handling an accident, including how to apply to the insurance company and prove that the car was borrowed.
These steps can reduce legal risks and avoid complicated claims disputes arising from lending your car
Frequently Asked Questions about Car Lending and Third-Party Liability Insurance in 2025
1. Is it necessary to buy third-party liability insurance?
Yes, Hong Kong law requires car owners to purchase one, with a maximum penalty of HK$10,000 and 12 months imprisonment for violations
2. Will my insurance coverage be affected if I lend my car to someone other than the designated driver?
Most car insurance policies cover unregistered drivers, but borrowers who are not the designated driver usually have to pay a higher upfront fee, and some policies have age and driving experience restrictions for borrowers
3. Will lending a car to a driver with a P license plate affect insurance claims?
P-plate drivers are often considered young or inexperienced, so insurance companies typically require an additional prepayment, which can increase the difficulty of claims and premiums. This is because car insurance policies usually include a clause that states if the owner lends the vehicle to someone else, the prepayment may increase or differ depending on whether the driver is an unregistered driver, a young driver, or an inexperienced driver in the event of an accident. Some policies may even exclude certain incidents from coverage
4. If the borrower is driving without a license, will the insurance company provide compensation?
Driving without a license is generally considered a violation of insurance policy terms, and the insurance company may refuse to pay compensation. The vehicle owner may also face legal liability and criminal penalties
5. What are the age restrictions for applying for insurance?
Typically, the policyholder and the registered driver must be at least 25 years old, with younger drivers incurring higher premiums and deductibles
6. Do I need to notify the insurance company when I change cars?
You need to notify the insurance company when you change vehicles, and the coverage for borrowed vehicles is not necessarily automatically extended to the new vehicle. The premium and terms may be adjusted
7. What factors affect insurance premiums?
This includes the vehicle model and year, the policyholder's age, driving experience, accident record, and past claims
AWM provides you with the most reassuring and comprehensive insurance support
Before lending your car, please carefully read your insurance policy and understand the risks. If necessary, consult a professional insurance agent. Find the insurance terms difficult to understand? AWM has experienced live customer service representatives to help you easily understand the coverage details. Use AWM's auto insurance quote service to instantly compare comprehensive and basic insurance plans from 65+ insurance companies, with professional answers available immediately, making insurance purchase simpler and more reassuring
