Auto Insurance Conundrums: Car Rentals and Car Shares

Whenever you rent a car, you’re presented with a rental insurance choice: Buy additional coverage through the agency or turn it down. Similar questions follow for car-share, whose industry growth is ever-burgeoning, according to Cromwell Schubarth at Upstart.

So, when you get around on shared wheels, what kind of insurance do you need to ensure your protection? These are complex questions with variable, intertwined answers. Let’s dig deeper now.

The first question: What insurance do you already have?

Insurance decisions are not easy as Lucas Peterson from the NY Times found out when his assumptions about rental insurance met the reality of a claim. The type of coverage you should (or shouldn’t) buy depends on the type you already have.

If you own a car, and you personally carry auto insurance, you have some options. Your personal policy will provide some coverage while you’re driving a rented or shared car. The coverage will generally be limited to the terms of your personal policy. So for example, if you don’t have comprehensive coverage on your personal vehicle, you also will not have comprehensive coverage on your rented or shared vehicle.

Health insurance. If you need care after a collision, your own health insurance may provide coverage. Be aware, however, that you need to think of others as well as yourself. Your health policy will obviously not apply to a passenger or pedestrian that you injure. To pay their medical bills, you’ll need liability insurance. For that, an auto insurance policy is quite obviously essential.

Extra coverage provided for credit card transactions. If you pay for your car-share or rental with a major credit card, some liability insurance coverage may be automatically included. Know the details before you get to the rental counter.

The second question: What coverage is required by the car rental or car sharing company and how great is the risk?

Obviously, if the car rental/share company’s insurance requirements exceed your personal coverage, you’ll have to purchase some additional insurance. Also, it’s important to consider the risk. If there are multiple passengers, inexperienced drivers, adverse weather conditions or a complex route with a higher than average chance of an accident or injuries to multiple people, you may want to consider higher liability limits.

The third question: What are the nuances of this car rental/share situation?

For example, “When you rent from the major car-sharing companies – car2go, Enterprise Car Share, Hertz 24/7 or Zipcar – your rental will include at least the minimum level of car insurance in your state,” said Joshua Taylor at WalletHub.

With peer-to-peer car-sharing, however, the rules are somewhat different. In that game, there are three players: the driver, the owner and the car-sharing company, each of which may be held liable at different times.

• The company typically offers liability, collision and comprehensive options, but this applies only during the rental period, and there may be limitations.
• The owner is responsible for damages that occur outside the rental period.
• The driver may rely on his or her own insurance for damages that occur during the rental period. And, as with a rental, the driver may also be able to buy supplemental coverage at the point of sale.

The fourth question: How much coverage is enough?

No matter which service you use, or which options you’re presented, follow these steps to help determine what you need:

1. Look at your deductibles. Before you rent or car-share, verify what the deductibles are on your personal auto insurance policy and your credit card policy. If the amount isn’t affordable, supplement your coverage at the point of sale to make it so.
2. Look at your coverage limits. Find out if your policies would cover another driver’s catastrophic medical bills, for example. If you feel uncomfortable with the answer, again, supplement.

As you can see, auto insurance is complicated when it comes to renting and sharing. There’s no one answer that fits every situation. We hope this article helps you navigate the sea of insurance options at the point of sale, and we welcome you to contact us if you have any questions.