Peer-to-Peer Car Sharing and Car Insurance

Does your car spend a lot of time just sitting in the driveway? What if you could make a few extra bucks renting it out by the hour to neighbors who don’t want the expense of car ownership but occasionally need the convenience of personal transportation? That’s the concept behind a growing trend called, variously, peer-to-peer car sharing, one-to-one car sharing and person-to-person car sharing. It’s being managed through several car-sharing services including RelayRide, Getaround, JustShareIt and Wheelz that typically let the car owner set the hourly and daily rates and take their profit out of a surcharge deducted from the owner’s rental fee. It’s cheaper than traditional rental car or taxi and more convenient than using membership-based services like ZipCar.

In fact, the whole thing sounds like a win-win except for one glitch: car insurance companies do not like it. Oh, the car-sharing services have their own insurance policies. Some cover liability and any damages you car might sustain while it’s out on rental or match your own personal policy up to a specified amount. Some also require the renter to cough up the deductible. All well and good, but that may not be enough for your
insurance carrier.

Here’s the problem car insurers see with car sharing and car insurance. When you let someone drive your car for money, you’re putting your car into commercial use and your personal car insurance policy doesn’t cover that. They would take the same dim view of charging passengers in your car pool. From their point of view, you’re running a for-profit taxi or livery service. While many of the peer-to-peer operations provide the required commercial coverage while your car is out for hire, before you participate, check with your insurer to make certain this is sufficient and that you aren’t nullifying your policy. Most policies extend your personal coverage to anyone you’ve given permission to drive your car. But does that include total strangers? Better confirm that when you talk to your insurance company.

Even if you get the green light from your insurance company, you may end up paying significantly higher premiums  if your car is involved in an accident while it’s out for rental. And, there could also be disputes about whether the accident occurred while the car was in your possession or a renter’s.

Car insurance companies don’t like this arrangement so much that some have canceled or refused to renew policies for customers who engage in peer-to-peer renting. To date, California, Washington and Oregon have passed laws that prevent car insurance companies from dropping you if your car is used for a peer-to-peer program.

If you’re still interested in pocketing some extra cash, experts suggest that you significantly increase your uninsured/underinsured driver limits and look into an umbrella liability policy of at least a million dollars.