How Car Sharing Affects Your Auto Insurance

How Car Sharing Affects Your Auto Insurance

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Prior to partaking in peer-to-peer car sharing as a renter or owner, ponder coverage issues carefully

Own an auto that’s predominantly remains parked and need some extra cash? Eager to rent some wheels for less without having to head to a faraway airport? You could be a prime candidate for car sharing—the increasingly popular peer-to-peer (P2P) practice whereby a person rents out their privately owned vehicle to a stranger who will drive that car for a short period and a predetermined fee.

Before the rental rubber hits the road, however, you need to do your due diligence as a car share renter or owner, especially when it comes to auto insurance. Because without proper coverage in place, you could suffer severe sticker shock in the form of medical bills, repair costs and property damage fees you’ll be required to pay out of pocket.

How Car Sharing works

P2P car sharing is facilitated by third party services, including RelayRides, Getaround, FlightCar, JustShareIt, and Hubber, that each uses an online network (accessible by website or smartphone app) to match prospective renters with owners seeking to loan out their cars in key markets throughout the United States. These services perform background checks to ensure that both parties have clean records and auto insurance in place and that the rental car is up to snuff.

Compared to conventional options like Hertz, Avis, and even Zipcar, car sharing services can be enticing alternatives. In fact, according to RelayRides, the company’s average renter saves 30 percent over traditional car rental companies, and the average active owner earned approximately $340 during the month of February 2015.

Note that “car sharing” is not synonymous with “ridesharing”; the latter is the practice of using apps—provided by companies such as Uber, Lyft, and Sidecar—to connect drivers (of their own cars) for hire to passengers seeking transport (more here).

What’s Covered—What’s Not by Your Car Sharing Auto Insurance

Although terms and policies will vary depending on the company, most car sharing services automatically provide free commercial auto insurance coverage for owners, renters, and third parties. State-specific limits and statues also add another layer of complexity to understanding how coverage can vary. The type of coverage that generally gets included through the car sharing services' coverage are listed below:

Liability up to $1 million combined single limit per occurrence. For the owner, usually this is primary coverage in effect during the period when the owner is delivering the vehicle to the renter and ending when the auto is delivered, but not in effect once the owner has retrieved the car or is en route to do so. For the renter, normally this is coverage that is secondary to both the renter’s personal auto policy and any supplemental coverage they may have (including coverage provided by a credit card that automatically kicks in when you rent the vehicle with that card). This means that an accident/injury claim is paid out by the car sharing service only after the renter’s personal/supplemental policy maxes out or denies coverage.

Uninsured/underinsured motorist coverage for the renter, usually not exceeding the statutory minimum limit allowable by state law (which can mean zero coverage, depending on the state).

Personal injury protection for the renter, typically not in excess of the statutory lowest limit allowable by state law.

Comprehensive and collision up to certain limits. Generally, owners are safeguarded against theft, fire, vandalism, and property damage to their auto and will be compensated up to the actual cash value of the vehicle; however, this protection can exclude any damage that occurs while the car is being delivered to the renter, everyday “wear and tear,” pre-existing damage, and personal belongings left in the vehicle. Renters typically can choose to either decline coverage in the event the car is damaged, lost or stolen (relying, in this case, solely on their personal policy) or opt for a supplemental insurance package, offered by the car sharing service, in which they’ll be protected minus a medium to high deductible they have to pay first.

For specific details on the insurance coverage provided by the major car sharing services, visit:

  • RelayRides
  • FlightCar
  • Getaround
  • JustShareIt
  • Hubber

Gap Between the Driver's Personal Policy and Commercial Policy

Personal auto policies usually don’t cover claims for accidents that occur while an owner’s car is being used for commercial purposes. This is why car sharing services typically provide additional liability coverage—to pay for the claims that personal policies refuse to pay.

Many believe that this commercial coverage included by car sharing companies is adequate. Some experts caution, however, that what these companies provide may not be enough protection, especially for owners who may want to sleep better at night. They advise owners to consider purchasing their own commercial auto insurance policy that offers adequate property damage and bodily injury liability and coverage for no-fault and personal injury, collision, uninsured motorist, and comprehensive physical damage. But commercial insurance coverage can cost hundreds to thousands extra per year.

The danger is that, if the expenses related to an accident claim exceed the cap set by your personal policy’s or car sharing service coverage limit—including expensive medical costs or a lawsuit resulting from a death or serious injury—you could be on the hook for paying those excess bills.“Keep in mind that auto insurance laws and requirements vary from state to state,” says Bob Passmore, assistance vice president of personal lines for the Property Casualty Insurers Association of America. “Whether the owner or renter’s personal insurance or the car sharing services insurance is primary or secondary depends on the state.”

Note that California, Washington, and Oregon have passed laws that prevent a personal auto insurance policy from being cancelled or non-renewed solely because the owner participates in a car sharing program. However, the laws do not require the owners’ personal auto policies to cover claims. In fact, the personal policy can exclude any and all coverage (including comprehensive and collision) for accidents that occur while the car is being rented out. And insurers in some other states may exclude, cancel or not renew personal auto policy coverage, or could significantly raise premiums, when you rent your vehicle to another driver via a car sharing service.

Before Signing Up for Car Sharing

Prior to engaging in car sharing, experts recommend that you read the fine print carefully on any coverage provided and fees charged by the car sharing service. “Go to the website of the company and look closely at the type of insurance protection offered,” Jeanne Salvatore, senior vice president/COO with the Insurance Information Institute, says. Ask questions about anything you don’t understand.

You should also contact your personal auto insurance company and ask to what extent your intended car sharing activities are covered by your existing policy. “Let them know ahead of time that you plan on participating in car sharing, and make sure that this won’t be a problem,” says Salvatore. Ask your insurance agent what minimum coverage limits and supplemental coverage they would recommend. Ensure that you’re not overpaying for or duplicating coverage unnecessarily in any way.

Prospective renters should especially ensure that they have liability coverage in place that at least provides 100/300/100 ($100,000 bodily injury, $300,000 per accident, and $100,000 property damage) according to experts. Consider increasing your personal uninsured/underinsured motorist coverage limits. Think about purchasing non-owner liability insurance if you don’t own a car. Contact your credit card company to learn if they provide free supplemental auto insurance coverage, and to what extent, if that card is used to pay for the car sharing rental.

Prospective owners shouldn't rely solely on liability coverage provided by your personal auto insurance policy; it is recommended that you purchase additional comprehensive/collision and commercial insurance coverage for better protection. Be sure the car sharing service has a system in place for thoroughly screening your prospective renters for accidents and moving violations.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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