Am I Covered When Using Peer-to-Peer Vehicle Sharing?

During the pandemic, a scarcity – and resulting high costs – of rental cars paved the way for a surge in peer-to-peer (P2P) vehicle sharing. Think of it like AirBnB^Ⓡ for your car. No more standing in line at rental car agencies only to find there are no cars for your reservation. Open an app, find a car near you that someone else owns and off you go!

While these peer-to-peer networks offer convenience and sometimes cost savings, they also pose some risks regarding insurance coverage. Before you drive a P2P vehicle or put yours out there for hire, it’s in your best interest to understand what is and is not covered by your vehicle insurance.

Today, you can rent almost anything from other people – houses, recreational vehicles, even swimming pools. Vehicle sharing has grown rapidly over the past five years, with new companies popping up all over the world, especially in larger cities. P2P vehicles are easy to locate and can offer savings over rental car company counterparts.

Unlike rental car companies that provide categories of cars, P2P apps show you the exact car that you can rent, and many offer luxury models. No need to wait in line at an airport or local rental office; P2P vehicles can be picked up at convenient locations.

But like deciding whether to stay at a hotel during a vacation or book a P2P spot, it’s important to consider the risks and rewards of your options. Price and convenience may not be the only factors in play. P2P services may include hidden costs and risks, so taking the time to read the fine print may prevent surprise charges.

Are You Covered as a Host?

An often overlooked reality is that if you offer your car on a P2P app, most personal auto insurance policies will not cover the vehicle while it’s being used in a car sharing program.

“Erie Insurance – and most other insurance companies – have had exclusions in place long before P2P apps became popular,” says Scott Cronk, product development manager at Erie Insurance. “Those exclusions preclude coverage while a vehicle is being used in an auto business such as renting or leasing the vehicle out for others to use. Several states have enacted legislation that further defines and clarifies what peer-to-peer car sharing is. As a result, insurance carriers, including ERIE, are adding or bolstering their existing policy language to exclude coverage for this type of exposure.”

Scott says the risks are too great for insurance companies to cover on a personal auto policy for a few reasons:

• Driving records of renters are unpredictable;
• Drop-off and pick-up locations can add risk; and
• Renters may be unfamiliar with an area, which may increase the risk of accidents.

Many P2P organizations offer insurance to vehicle hosts for a fee. Some hosts, like this Turo user, have had positive experiences with P2P platform coverage after a claim. Remember, as a host, you must choose P2P coverage because your personal auto insurance will not cover your for-rent vehicle while being used on the P2P platform.

If you have had a bad experience as a P2P host, the Federal Trade Commission recommends reporting it.

Are You Covered as a Renter?

If you rent a car through a P2P platform and are involved in an accident, managing insurance coverage can become more complex.

“In general,” says Scott, “the drivers own auto insurance policy will cover them when they rent a vehicle for personal use. When you rent a vehicle and purchase coverage through the rental agency or P2P platform, even more fine print comes into play. Rental contracts describe in detail what they may or may not cover, and do not offer as broad of coverage as your own auto policy. Many people ignore these details up front and may end up frustrated by the results after a claim.”

Scenario: You rent and do not opt for additional coverage.

If you rent a vehicle while on vacation and opt out of additional insurance coverage through the P2P platform, typically the broadest coverages that you’ve selected for your own vehicle transfer to the rental vehicle, including deductibles, liability, comprehensive and collision options.

If you’re involved in an accident in a P2P vehicle and only have liability coverage on your policy, you could be responsible for damage to the P2P rental. The coverage limits that you’ve selected on your own policy also apply, so if your limits are less than the damages, you could be responsible for the difference.

Scenario: You rent and you choose coverage through the P2P company.

If you choose an added layer of insurance protection through the P2P app, again, review the details. Rental insurance often is classified as “secondary” or “excess” insurance. This means that the added coverage will pay claims after your personal insurance has reached its limits.

Scott says that the additional coverage often will not pay the “first dollar” toward a claim, which means your insurance will pay first.

And if you use a credit card that has rental insurance vehicle coverage, a third entity may enter the “who pays first” discussion.

“When a P2P claim is made, insurance adjusters from each company may become involved and policy reviews will determine which companies pay first and to what limits,” he says. “It can take time and, in the end, you still may be responsible for deductibles and out-of-pocket expenses.  It’s indeed confusing for the consumer. While P2P platforms offer another option to rent a vehicle, each consumer has differing preferences and coverage needs.  It’s always recommended to talk with your insurance advisor to ensure those needs are met.”