Would you rent your car to a stranger? In the United States, more car owners than ever are saying yes. Using peer-to-peer car sharing (aka P2P car sharing) services like Turo, Avail, Getaround, and JustShareIt, they’re turning their personal cars into moneymakers. According to Automotive World, the number of P2P car sharing vehicles has more than doubled since 2015 (~200k to 440k cars). That figure is expected to more than double AGAIN by 2025 to ~990k cars.
If your car would otherwise sit idle, listing your car on a P2P car sharing service may be an enticing proposition. What’s not to like about earning extra cash while helping to reduce the total number of cars on the road? But it’s important to understand that letting strangers drive your car isn’t without risk. And we’re not just talking about risk to your car. If you don’t do some legwork to ensure that you’ve got the right insurance coverage, you could end up putting your personal auto insurance coverage at risk.
So what are the insurance considerations of P2P car rentals for individuals considering listing cars? How does auto insurance work for car sharing services? And what are some tips to help you limit your risk? Here’s what you need to know.
P2P Car Sharing and Insurance: How It Works
First, let’s get clear on the basics. Your personal auto insurance policy will not provide coverage for your car when it’s being rented via a P2P sharing service. Similarly, the personal auto insurance policies of your car’s renters are unlikely to provide coverage for any claims incurred while they’re driving your rented vehicle.
Yes, this is confusing, because most personal auto insurance policies DO provide coverage on traditional car rentals. Over the past few years, however, many auto insurers have added language to their policies specifically excluding coverage for P2P rentals. (Language varies. For example, your policy exclusion may simply refer to excluding “third-party rentals.”) Similarly, many major credit card companies specifically exclude coverage for P2P car rentals. So if you’re used to waving your Amex at the car rental counter when they ask if you have sufficient coverage, know that it won’t help you here.
The bottom line? Car owners who list their cars on P2P car sharing services need to purchase supplemental auto insurance coverage. There are two primary options:
Purchasing auto insurance through the P2P car sharing service. Most services offer a range of insurance packages to hosts, typically partnering with insurers to administer coverage. All coverage levels provide liability coverage that meets or exceeds state minimums. Higher coverage levels may waive deductibles. Lower coverage levels may exclude coverage for exterior wear-and-tear, loss of hosting income, replacement vehicle reimbursement, and more.
Purchasing a commercial auto insurance policy. Some P2P car sharing services will accept commercial insurance policies in lieu of the coverage they offer. For example, Turo allows “Commercial Host” car owners to provide commercial rental insurance policies that cover both owners and renters. But they also stipulate that “Most commercial policies would likely exclude rentals, so the option to become a Commercial Host will almost always be available only to rental car companies, which can then list their vehicles on Turo.” All this to say, this is unlikely to be a viable option for an individual host renting out his or her personal car.
Insurance Considerations of P2P Car Sharing Coverage
Insurance coverage levels vary widely between P2P car sharing services. Do your homework to make sure you understand the coverage you’re signing up for. Note that coverage may be bundled in unfamiliar ways. Lower-tier packages exclude certain coverages.
Many coverage levels carry deductibles. Make sure your deductible makes sense for you. Also, note that different types of claims may carry different deductibles.
“Wear and tear” isn’t usually covered. Some P2P car services handle wear and tear via “contractual” limitations and allocations rather than insurance. Most exclude reimbursement for interior wear and tear. Exterior wear and tear coverage is available only in higher tiers, but limitations are common. For example, if a scratch to your bumper or body paint is less than three inches in length, that may be designated “normal wear and tear.”
P2P-provided coverage does not replace your personal auto insurance policy. Beyond liability, P2P coverage packages do not meet all state-required minimum coverages. So while P2P-provided coverage becomes primary while your vehicle is being rented, maintaining your personal auto insurance is still an absolute must. P2P services require owners to keep personal insurance cards and proof of registration in listed vehicles at all times.
Renters may be able to decline P2P-provided coverage. While that doesn’t mean they’re off the hook, it does mean that arranging repairs or other restitution can become more complicated. (Remember, renters’ personal auto insurance policies are unlikely to provide coverage.) At the time of publication, Avail and Getaround automatically include coverage for renters, but Turo does not. JustShareIt only provides coverage in California, Texas, Illinois, Oregon, and Virginia.
Important Insurance Tips for P2P Car Sharing Hosts
Talk to Your Insurance Company FIRST
Before you list your vehicle with a P2P car sharing service, talk to your personal auto insurance company about your plans. In many states, insurers have the legal right to cancel your policy (even retroactively) if you rent out your car. Some states have created legislation specifically governing P2P car sharing, but public agencies are still clarifying what their roles will be in regulating the practice.
All this to say, it’s important to be transparent with your auto insurance company so that your personal auto coverage isn’t at risk. Obviously, if your insurer prohibits covered vehicles from being used in P2P car sharing, you’ll need to find a different insurer before you proceed with listing your vehicle.
It’s also a good idea to talk through other P2P car sharing considerations with your insurer. Ask them to help you understand your potential risk and exposures. For example, if a P2P-insurance-processed claim exceeds the policy limits, will your personal policy kick in to pay? Will listing the car on a P2P car sharing service impact your rates?
It’s Better to Err on the Side of MORE Coverage
Most “expert” articles out there recommend choosing a higher coverage tier. Going with the lowest-tier coverage packages mean you’re increasing the risk that you’ll end up paying more out-of-pocket.
Make Sure You Understand the Fine Print
P2P car sharing services need to reduce their own liability where possible. That means their legal teams have added some very careful language around coverage requirements and exclusions. For example, if it turns out that you didn’t adequately maintain your vehicle, they may have a legal right NOT to pay your claim. (See Turo’s maintenance requirements.)
Before Signing Up, Conduct a Careful Comparison Not all P2P car sharing services are created equal. They have different operating procedures, policies, and customer service capabilities. Read reviews from both hosts and users. Make sure you understand the niceties of how the different services work. For example, while GetAround touts the convenience of providing ready-to-drive rental cars with the keys already inside, their security devices are not infallible.
Bonus Insurance Tip: Even if you’re not considering listing your car on a peer-to-peer car sharing service, your auto insurance may benefit from a tune-up! Check out the six reasons it might be time to reshop your car insurance. For fast, accurate quotes, try out Covered’s easy quoting tool.
Still have questions about P2P car sharing insurance considerations? Send us a message or give us a call at (833) 487-2683! One of our licensed insurance advisors will be happy to help.