Making extra money by letting people borrow your car is the thrill of peer-to-peer auto marketplaces like Turo and Getaround. You can turn an idle car into some extra cash.
But, how do you make sure that your insurance coverage is adequate to keep you and your bank account safe?
Read this article to learn best practices for protecting your assets while making passive income on your car.
No. Jason Hargraves, managing editor of InsuranceQuotes.com says, “The most important thing to understand is that your personal auto insurance will NOT cover accidents that occur when your car is being rented out.“
Most likely, your personal insurance policy excludes coverage when you are renting out the car to a third party customer.
Guests will not be covered by your personal car insurance policy. They will either need to be covered by their own personal policy or choose to get coverage through the rental marketplace during checkout. This is just like when you rent a car at Hertz or Enterprise, and they ask if you want the insurance or to waive the coverage.
KAAS Law explains, “Personal auto insurance policies are now being written to specifically exclude peer car-sharing apps from coverage. While, companies such as Uber or Lyft provide liability insurance coverage to accommodate peer-to-peer car sharing, it is best you check if the P2P car sharing company you are participating offers such coverage.”
“Most platforms offer a basic package of liability coverage for the host (the owner of the car being rented),” according to Hargraves. “Many also have tiers of coverage if you want more, so it’s what you feel most comfortable with. These tiers can include varying levels of collision and comprehensive coverage, such as excessive wear and tear or providing a replacement car while yours is having repair work done. Each company will be different, so pay attention when you sign on. I always suggest asking what’s NOT included in whatever tier you choose. Also, look for time parameters. Often you need to make a claim shortly after you discover damage.”
Turo states, “We do not expect your insurer to cover losses arising while the car is shared. That’s why Turo has purchased a $1,000,000 liability policy and also provides protection for physical damage.”
There are a few different things to think about.
To cover the car while someone else is in possession of it, you will either need to look into a commercial auto insurance policy or choose a policy through the marketplace or app where you are listing it for sharing.
“You need ample coverage,” says Hargraves, “and I would suggest making sure you add comprehensive and collision to the basic liability coverage offered by these platforms. If you find what they offer insufficient or too pricey, then consider taking out a commercial auto policy on your car. Most auto insurers offer these policies for people who use their car for business.“
You need to keep your own personal policy, in case you drive the car or it gets damaged as it is parked outside your home or apartment. “Regardless of what coverage you choose for car-sharing,” Hargraves advises, “you will still need a personal auto policy on the car. Why? Your car-sharing insurance only covers your car while it’s being rented out. If you drive your car or something happens to it when parked on the street and not in use, then that is on you. Don’t make the mistake and forgo a personal policy.”
Turo also suggests that owners check with their insurance company before signing up.
Insurance policies and exclusions are highly variable and depend on the company you are covered by and the state or local laws. You want to make sure that joining the service doesn’t void your insurance.
Turo warns, “Your insurer’s response to car sharing will depend on their specific policies and the laws of the state in which your car is registered. If your insurer is concerned about your participation in our marketplace, we believe you should be able to withdraw from Turo and retain your coverage. If you receive any indication that your insurance is in jeopardy, we would like to know about it so we can address it with the insurer and potentially with your state’s insurance regulator.”
In a carinsurance.com article, the site’s consumer analyst Penny Gusner advises, “To be completely covered properly, I’d recommend talking to your car insurance company at the onset of participating in a P2P car-sharing program. Your insurer will tell you what, if anything, your personal policy covers and if you need to upgrade to a commercial policy. It is better to be proactive so you don’t get yourself into a financial bind by not having the coverage you need.”
KAAS Law warns that if you don’t inform your insurance company of your participation, it’s possible that the insurer will cancel your coverage. “Thus,” says KAAS, “its best to check with your insurer before placing your car for rent on a car-sharing app.”
Additionally, if your policy is ever canceled by your insurer, it can be harder to get insured.
What if the unthinkable happens, and the car is damaged? Will your current insurance policy respond if something happens to your car while it's rented out?
Policies from car sharing platforms like Turo and Getaround are meant to take care of the accidents that happen when the guest is in possession of an owner’s vehicle. They are primary to both the owner and the renter’s personal policies.
However, Turo explains an exception regarding underinsured and uninsured motorist (UIM/UM) protection and personal injury protection (PIP), “In some states, certain coverages may continue to stay with the vehicle, even during the rental period. In states where the UIM/UM, PIP, and liability coverages ‘follow the vehicle,’ in the event of an accident, the host’s insurance could be implicated. To note, Turo, through its third-party liability insurer, provides the statutory minimum UM/UIM coverage in all states, which may sometimes be zero.”
From a vehicle owner’s perspective, there are a couple of different things to worry about when it comes to car sharing. Owners may be on the hook for third-party liability and financial consequences of physical damage to the shared vehicle.
What does that mean?
Both Turo and Getaround use a $1 million liability policy. As NerdWallet explains, this liability policy is used “in case a renter crashes your car and you’re held responsible for others’ injuries or property damage. Even if you and the renter have your own liability insurance, coverage from the car-sharing company is the primary insurance, meaning you can use it before any other policy.” Idaho attorney David Leroy says via KIVITV, “For the most part, a million dollar policy should cover almost all potential losses that the owner of the vehicle who was renting it out could suffer.”
Much like renting a car from traditional car rental companies, drivers who use the Turo app can choose to purchase insurance coverage for a percentage of the trip price or decline coverage.
Both companies also include protection against physical damage, but amounts vary, depending on a host’s service level. They both offer physical damage protection for the value of the car.
Turo offers a couple different perks, based on the protection plan you choose: Basic, Standard, or Premium. Here is a quick breakdown of the Turo protection plan and its coverage for car owners:
But of course, as with all insurance policies, there are several specifications: Check out the full policy here.
Renters are on the hook for damage, unless they pay for a damage waiver while renting. Much like a standard car rental, drivers who use the Turo app can choose to purchase coverage for a percentage of the trip price or decline coverage.
Will your own personal car insurance be affected by a renter’s accident?
Turo says this: “As a general statement, we believe that your insurance should not be affected if your vehicle is covered under one of Turo’s coverage plans. … If the guest gets into an accident, our insurance policy will go into effect. That should leave your personal policy untouched.”
The plan also offers roadside assistance. Check out the full policy here.
Exception — New York
For both P2P marketplaces, the state of New York is its own exception. Getaround requires that each car owner get a commercial insurance policy, while owners in New York aren’t allowed to rent out their vehicle through Turo.
Hargraves explains, “This is a very new industry and as such the rules and laws are constantly changing. I suggest investigating a car-sharing company thoroughly before choosing one. Go online and look for reviews. You are entrusting a platform with what is probably one of your larger assets, so it pays to do your homework. If you can’t get straight answers in a timely manner, then find another company. Also, keep up with your state laws regarding these companies and the insurance requirements. Laws vary by state so if you move, it might be time to change car-sharing companies.”
So, before you add your personal vehicle to the sharing economy, make sure that you contact your insurer, and understand your options, between the different companies and insurance plans.
Special thanks to Jason Hargraves, managing editor of InsuranceQuotes.com for contributing to this article!
September 14th, 2022
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