Baby, you can rent my car

By Posted : 07/18/2012

relayrides car renting and insuranceWant to rent out your Chevy, Buick, Caddy or GMC truck? If you have OnStar, it just got easier.

OnStar, a subsidiary of General Motors, has partnered with RelayRides, one of the biggest peer-to-peer rental companies, to connect OnStar subscribers with potential customers, says Nick Pudar, OnStar's vice president for strategy and new business development.

That means any General Motors vehicle equipped with the telematics communications system -- including Chevrolets, Buicks, Cadillacs and GMCs -- can be offered up for rent by owners.

Pudar says it's a simple process: OnStar subscribers go to the OnStar website and input data that links their cars, trucks, SUVs and vans to RelayRides, which makes them available to anyone in the RelayRides client base. Once the renter is approved by RelayRides, the renter is given the vehicle's location and a security code. This allows the renter to unlock the car through his or her smartphone by responding to a text message. (See also: "Ford and State Farm: In SYNC for insurance discounts.")

"It's all very streamlined and secure," says William Nikosey, a spokesperson for RelayRides. "Owners rent out their cars and turn their idle vehicles into an income source without the hassle of installing expensive aftermarket hardware or having to meet a renter to hand off keys."

Peer-to-peer car sharing may be a bad auto insurance move

While the arrangement may be a financial plus for owners -- RelayRides says some clients make as much as $600 a month sharing their vehicles -- there could be major insurance consequences. (See: "Hello stranger! Here's the keys.")

Loretta Worters, spokesperson at the Insurance Information Institute, points out that a personal auto policy may not protect the vehicle's owner from liability if it is involved in an accident while being rented. Typically, policies for private cars exclude any type of business use.

"People think that they are saving money and maybe in the short term they are, but they should be aware that they are taking a risk that could prove to be very costly to them down the road," Worters says.

In many states your insurer could cancel your policy or raise the premiums if the carrier learns that the car is being rented because the insurer may deem the vehicle to be at a higher risk, Worters says.

"RelayRides, and any peer-to-peer car sharing service, is doing a disservice to its customers by not disclosing to them that they are putting their personal insurance and perhaps their own assets at risk," she says. "These companies should let their customers know that if their vehicle is being used as a commercial venture, it should be insured with a commercial policy."

RelayRides does provide some protection for both owners and renters. Vehicle owners are automatically provided with a $1 million liability insurance policy, plus collision and comprehensive coverage, and the car itself is covered up to its actual cash value, without a deductible, for the duration of the rental. However, you could be responsible for paying the difference should a claim exceed $1 million. Renters pay a $500 deductible if a claim is made on the RelayRides policy.

"We firmly believe that car owners should be able to confidently list their cars in a peer-to-peer marketplace without fear of being held liable for incidents that occur when renters are driving their cars, or having their personal insurance policies non-renewed," says Shelby Clark, RelayRides' co-founder and chief community officer.

Clark also notes that California, Oregon and Washington recently passed laws that prevent insurers from canceling policies of car owners who decide to share them. But Worters points out that there are restrictions.

"California's law, for example, requires all ride-sharing companies to provide insurance equal to or greater than the car owner's coverage," she says.

Car insurance restrictions for unlisted car borrowers

Penny Gusner, a consumer analyst covering the auto insurance industry, says that if your car is lent, but not rented for money, the drivers listed on your policy are covered without restrictions.

But, she notes, some insurers do place restrictions on drivers not named in the policy. Here are three examples:

  • Drop-down limits reduce the coverage for anyone not listed on the policy to the state minimums, even if the user has permission to drive the car.
  • Double deductible does what it says -- doubles the deductible on your collision coverage for any non-listed drivers.
  • No physical damage coverage means the insurer will pay the third-party liability damages, but not the vehicle's repair bill, if a driver not listed on your policy has an accident.
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