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How Car Sharing Affects Your Car Insurance

Jason Metz

What is Peer-to-Peer (P2P) Car Sharing?

In recent years, people began to consider how to keep their vehicle in use as a way to offset costs and earn extra money. To capitalize on their vehicle’s worth, multiple grassroots programs started. Similar to ridesharing services like Uber and Lyft, P2P car sharing allows a vehicle owner to make money with their car. However, instead of owners using their vehicle like a taxi, an individual simply rents their cars to another driver for an agreed upon period of time. Think of it as an Airbnb for autos. Even Ford and Toyota have jumped on the P2P bandwagon, hoping to help owners offset their monthly car payments by setting them up with a P2P car sharing service.

More: Rideshare insurance for Uber and Lyft drivers

Businesses such as Turo and Getaround operate by renting your car to locals and travelers alike. Typically, these businesses collect a fee and the owners end up with 60% to 85% of the trip price. Both services run through apps available on both Android and iOS. They claim to screen renters through driver’s licenses, social media accounts, and other resources, as well as individual renters and owners having user reviews.

Getaround offers vehicles on an hourly and daily rate, and according to their ad, as low as $5 an hour. Turo offers vehicles to renters on a daily rate and claims to have cars available in more than 300 airports and 4,700 cities. Turo also offers discounts for longer rental periods. For example, a Chrysler 300 was available for five days in Los Angeles at $35/day, with a 12% weekly discount, a break from its typical $40 daily rate. The models and makes of the vehicles vary, as well. In addition to modern cars like hybrids, SUVs, compact, and luxury autos, renters can also find vintage automobiles. In a search of vehicles available in June 2017 in Los Angeles, we found a 1967 Volkswagen Bus, a 1977 Lincoln Continental Mark V, a 1972 Cadillac El Dorado, and a 1983 Jeep C7.  

If this sounds like a great idea for both renters and owners as a way to make money while your car would normally be sitting idle, remember, there is some risk involved in terms of auto insurance and you’ll want to do your research before potentially exposing yourself to a financial loss.

Beware of the Risks:

Auto insurance laws vary by state, so you’ll want to do your research to determine how car sharing affects your auto insurance. Both Getaround and Turo offer insurance, from basic to premium packages, so be sure to review them. Additionally, many consumers believe that they’re entirely covered by their credit card or personal auto insurance, and that’s not always the case. Before participating in a P2P program, you’ll want to speak with your auto insurance agent, credit card company, and read the fine print of both your policy and the P2P program’s policy to ensure you’re covered. Accidents do happen, and if you’re not properly covered, you may be liable for a range of incidents, from simple repairs to injuries and medical bills.

Permissive Drivers

Most car insurance policies extend coverage to anyone that the car owner allows to drive their vehicle. However, rarely, if ever, is permissive use extended for commercial use. If the P2P program you’re participating in doesn’t offer insurance coverage for those driving your vehicle, take the time to research your options. Consider buying commercial auto insurance, if applicable. 

Higher Risk

Your auto insurance premium is based on your personal use of the car. Beware that car sharing exposes your car to greater risk with unfamiliar drivers, more time in traffic, and locations you may not usually drive in. There is the possibility that your premium will increase if your car is in an accident while it’s rented.

When it comes to peer-to-peer car sharing, the most important thing to do is research, read the fine print, and obtain coverage. Car repair is costly, and medical bills even more so. If you don’t have the proper coverages in place, you’re opening yourself up to financial risk that could by far outweigh the financial benefits of renting your vehicle. Similarly, if you’re a renter, you want to be sure you have adequate coverages in place to protect yourself while driving someone else’s vehicle. Whether you’re covered through your own policy or through a car sharing program, know the insurance details so that you won’t be blindsided by unexpected costs.