Car Sharing? What to Know About Auto Insurance

They say most cars spend most of their time sitting parked. For those who’d like to get a little more value out of their wheels, car-sharing can be an awfully good idea. People have been experimenting with car-sharing for many decades, but the phenomenon didn’t gain real traction until around the year 2000, when Zipcar, Flexcar and City Car Club were launched. The idea took off. By 2012, there were roughly 1.7 million car-sharing members across 27 countries, with 800,000 in the U.S. alone.

Car-sharing can take several different shapes. It could be a business like Zipcar, where commercially-owned vehicles are rented to customers by the day, hour, or even by the minute. It could be an app that lets individuals privately rent their car to others, like the peer-to-peer service Getaround. Some car manufacturers offer car-sharing services too, such as BMW CarSharing.

How does this type of arrangement jive with your auto insurance? Here’s what you need to know.

Auto insurance and car-sharing companies

When you rent from a company like Zipcar, the price of rental typically includes the minimum level of auto insurance required by your state, if not more. In 15 states, personal injury protection is mandated; in 21 states, coverage for uninsured or underinsured motorists is mandated as well. Deductibles may range from $250 to $1,000, depending on the company and rental particulars. You’ll likely have the option to upgrade for more coverage, for a fee.

Auto insurance and peer-to-peer car-sharing

While car-sharing companies handle insurance much like any other car rental company, the insurance for peer-to-peer sharing gets a bit more complicated. If a collision occurs, who’s liable – the owner of the vehicle, the driver they rented it to, or the peer-to-peer service that facilitated it? Here, there are several things to bear in mind.

1. The renter isn’t covered by the owner’s insurance. Therefore, renters need their own insurance.
2. If renters don’t have insurance, or they want supplemental coverage, the car-sharing service may be able to provide it. This coverage would apply only during the rental session.
3. The rental policy probably limits coverage for the owner’s vehicle to the maximum cash value of the car and several limitations may apply. Read the fine print.
4. If the owner’s insurer finds out that the car is being rented, it can drop the policy – even retroactively – in most states.
5. If renters pay with a credit card, they may get automatic additional coverage for vehicle theft or damage – depending on their credit card perks.
6. Passenger injuries in a shared car may not be covered; there are ride-sharing-friendly policies that address this.

Auto insurance tips for those who car-share

Get the details. Find out whose policy is covering the car during your rental period. Decide if you can afford the deductible. If you carry a passenger, are they covered too? Add coverage if needed. Supplemental options should be available to lower your deductible or expand coverage. Compare the options to a non-owner car insurance policy to see which is better and more affordable.

Look for damage. Whether you’re required to or not, do a walk-around every time you rent a vehicle, write down every imperfection you find, and get the owner to sign off on it. And last but not least, sign out promptly. Coverage that applies during a rental period will remain in effect until you terminate the session. So don’t forget to sign out! Otherwise you could be liable for damages that occur after you leave.

While Heffernan is well known for business insurance, we also provide homeowners, auto insurance and private client insurance services. Let us know if we can help you with your personal insurance protection.