insurance

Auto insurance risks of car sharing

Car-sharing risks

While car sharing has its obvious convenience and benefits to society, it presents several problems for auto insurance companies that could affect your coverage.

  • Livery: If you rent your ride, your personal policy won't cover it. Many P2P programs understand this problem and provide the necessary commercial auto coverage when your car is being driven by someone else, but it's best to confirm coverage before turning over your keys.

  • Who's driving? Your auto policy extends coverage to those driving your car with your permission. Would that coverage also extend to total strangers? If the P2P program doesn't offer coverage, has that driver's insurance and driving record been vetted? "If you don't know that person you allowed to drive your car, that's risky," says Mitch Wilson, spokesman at the Ohio Insurance Institute.
  • Increased risk: Premiums for individual coverage are based on personal, not commercial, use of your vehicle. Submitting your car to ride sharing exposes your auto to greater risk from weather, traffic and drivers unfamiliar with the vehicle. "Some insurers view car-sharing services as a higher risk, so they may cancel or not renew a driver's car insurance policy or increase premiums if a policyholder's vehicle is involved in an accident while it's being rented," says Loretta Worters, vice president of communications at the Insurance Information Institute.
  • Liability: "What if you don't maintain your car properly, and there is an accident caused by poor maintenance of the auto?" says Moraga. "Does that other person's policy then cover? Do you have any culpability?"
  • Transition: "What if there's a dispute about exactly when a fender-bender occurred -- was it while the rental company's insurance covered the car or when your own policy did?" says Worters. Some P2P companies are experimenting with data recorders and phone apps to track time, mileage and who's behind the wheel, says Moraga.
  • Depreciation: If a car-sharing driver wrecks your car, the P2P company's insurance may fix it. But are you then stuck with the depreciated value on your personal auto insurance?

This year, California and Oregon passed the nation's first car-sharing laws to attempt to address these concerns. California's law requires all ride-sharing companies to provide insurance equal to or greater than the car owner's coverage. Under California law, participating in a car-sharing program doesn't constitute commercial use of your vehicle as long as the service provides the insurance and you don't earn more revenue through the car-sharing service than the monthly costs of operating the vehicle.

"No matter how well the legislature tries to anticipate these issues, there may be some issue that the law doesn't address that the courts will have to," Moraga says. "There are going to be some interesting challenges to this. The minute that you have an accident, that's going to start to test that law."

What steps should ride-sharing enthusiasts in other states take to make sure they're covered until their state enacts similar statutes?

Worters suggests being on the safe side. "Consumers who participate in peer-to-peer ride sharing should increase their uninsured/underinsured limits and, if they don't already have one, purchase a million-dollar umbrella liability policy," she says.

Moraga suggests a less-expensive safeguard.

"It really would behoove people who are going to become involved in this to know exactly what their policy covers," he says. "One of the biggest challenges we have in this business is that most people don't even know what their policy covers."

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