Will insurance pay if you allow an unlicensed driver to drive and an accident occurs?

NO. By allowing a person who is NOT a licensed driver to drive your car, you committed an offense under the state regulations, so your insurance company can refuse to pay any claims. That is not true in California. Unless the person is specifically named as excluded from the policy, the insurance company will pay up to the limits on that policy. The original question asked about an UN_LICENSED driver. I can't think of any jurisdiction where a person that doesn't have a state issued driver's permit , who has a car accident would be covered by ANY insurance company. The insurance company MUST have a clause that bans such a thing from happening.