Check Insurance Coverage When Car Sharing

insurance for car sharing

As gas prices continue to climb, the average annual cost of driving even a small car is now somewhere around $10,000, according to the Canadian Automobile Association.

So it’s not surprising that thousands of Canadians carpool to work or school, both to save money and preserve their vehicles. In fact, car ownership is making less and less sense to many people, especially those who live in the city and can bike or grab a bus.

And yet, there are times when having a car – or at least access to one – is still a bit of a must. That’s why more and more urban drivers are looking at car-sharing services that allow drivers to rent cars by the day, or even the hour.

Editor tip: If you’re looking to save even more on gas, try using a gas rewards or cash back rewards credit card when filling up. A great option is the MBNA Smart Cash Master Card credit card, which awards up to five per cent cash back for the first six months (up to two per cent after that) on gas and grocery purchases. Plus, you’ll also score a FREE $100 gift card from if approved, for a limited time.

 When Car Sharing Makes Sense

Unlike a carpooling system, where a few people show up each morning and drive to work together, car sharing involves joining an organization that owns vehicles scattered throughout a city.

Members of Zipcar, for instance, pick up cars from various locations across Toronto or Vancouver and return them to the same spot. You book online or by phone, pay an hourly rate to use the car, and then return it to its designated parking spot when finished.

As a result, there are no worries about financing, depreciation, maintenance, or the price of gas.

 Check Insurance Coverage Closely

But what happens when it comes to insurance coverage when you’re essentially driving someone else’s car? Or when somebody is driving your own vehicle for that matter?

Zipcar members are covered for $300,000 for all third party bodily injuries or property damage. The actual vehicles are covered under a comprehensive collision policy, subject to a damage fee of up to $750 if they’re involved in an incident during their reservation.

Is that enough? It depends. Most standard auto packages in Canada generally start at a higher threshold.

Renting Out Your Own Vehicle

Recognizing the appeal of car sharing, some cash-starved drivers have even started renting their own idle vehicles out to those who might need a set of wheels from time to time.

Generally, your auto policy extends coverage to those driving your car with your permission, as they might with a neighbour off to get groceries. But there can be problems if you go beyond that.

 Companies like RelayRides encourage people to rent their wheels to others, the same way they might rent out rooms and vacation homes. You set the price and they list your car online, connecting you with drivers who want to rent it – for a fee, of course.

And that really makes it a business, says insurers, who’re generally reluctant to cover a claim that results from you using personal vehicles for commercial use.

Watch For Premium Increases

In fact, insurers have the right to cancel the policy of customers who use their cars for commercial purposes without informing them. At the very least, it would affect your premiums.

Premiums for individual coverage are based on personal, not commercial, use of your vehicle – which makes sense. Putting your vehicle up for rent exposes it to greater risk from weather, traffic and drivers unfamiliar with the vehicle.

RelayRides is well aware of this and has an insurance policy in place to offset the fact that your own insurance company would likely deny a claim in this instance. But whether that would be adequate in the event of a catastrophic accident is a matter of debate.

Related Topics

Car Insurance 101 / Insurance

Leave a Reply