insurance

Auto insurance risks of car sharing

Steering wheel
Highlights
  • If you profit from carpooling, individual coverage is typically excluded.
  • Peer-to-peer car sharing comes in two flavors: for-profit and nonprofit.
  • If you rent out your ride, your personal auto policy won't cover it.

Does your auto insurance cover car sharing?

The answer may surprise you.

Every weekday, millions of Americans carpool to work or school to save money, preserve their vehicles and help the environment by reducing the number of cars on the road. The 2000 U.S. Census found that 15.6 million, or 12.2 percent, of all commuters carpool to work.

In the past decade, eco-minded motorists have taken carpooling one step further and established grassroots "peer-to-peer" car-sharing programs that enable them to share their vehicle with total strangers or forgo car ownership altogether and simply borrow a vehicle when necessary. Although their numbers remain small -- 518,520 drivers sharing 7,776 vehicles through 27 programs across the country, says University of California, Berkeley researcher Susan Shaheen -- the trend is growing.

"You're seeing it primarily in college cities because it works very well for a college campus where students just need cars to do errands and not for the full day," says Pete Moraga, spokesman for the Insurance Information Network of California.

If you drive as a member of a car pool, your auto insurance company has already given you the green light in its standard contract as long as you make no money from it. However, if you use your car as a taxi or livery service to carry people or property for profit, individual coverage is typically excluded.

"If you're a car pooler, coverage does apply," says State Farm spokesman Kip Diggs. "If I'm in my vehicle and you're driving, you would be a permissive user in that case, so coverage would also apply."

Peer-to-peer car sharing

That green light turns to caution-yellow where peer-to-peer car sharing, or P2P, is concerned. If you've already enlisted your car in the P2P cause or are thinking about it, there are a few potential legal potholes to be aware of on this freshly paved road.

P2P car sharing comes in two flavors: for-profit and nonprofit. For-profit programs, such as Zipcar, Getaround and RelayRides, will rent your car during times of your choosing and share the proceeds with you. Nonprofit programs may offer lower rates and other features including car pooling.

There are also a growing number of car-sharing programs offered through commercial car-rental competitors that rent their own vehicles. Some are run by auto manufacturers, such as Car2go from Daimler, and some are run by car rental giants, such as Hertz On Demand from Hertz, WeCar from Enterprise and even U Car Share from U-Haul.

Although business models vary widely, the ride-sharing concept is simple: For a nominal membership fee, you gain access to cars on demand at minimal rental rates of $5 to $15 an hour and $50 to $150 a day. You search online for the ride you want at the location nearest you, and schedule your rental time. Using a card, access code or lock box, you pick up your vehicle and return it at the assigned time and place.

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