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Do Car Sharing Service Like Zipcar Offer Enough Insurance Coverage?

Zipcar has been growing by leaps and bounds the last few years as more and more people have discovered the ease of a car sharing service. While using a car sharing service is convenient, are you covered if you get in an accident? In a serious accident you could be on the hook for thousands of dollars in damage.

These services cater to people, usually urban dwellers in good-sized cities, who only need a car once in awhile for a few hours at a time and are not driving far. The cars are normally parked in neighborhoods and can be booked online or by smartphone app. The cars are rented by the hour, the mileage is limited and the price includes fuel and insurance.

A traditional rental on the other hand allows you to drive the car the entire time you rent it, and the mileage is unlimited.  However they do require you to cover the cost of fuel and insurance on your own. If you don’t already own a car and have an insurance policy you will be required to purchase liability from the rental agency. Collision coverage is an option, one you should consider, as you will be on the hook for repair costs to the rental if you are in an accident.

The difference between a traditional rental and a car sharing service can be huge from an insurance standpoint.

What You Need to Know About Insurance for Rentals 

Traditional rental cars – Rental companies charge anywhere from $14 to $25 a day for coverage. This can really add up if you are renting the car for a week. In addition, you will need to cover the cost of your medical care if you don’t have health insurance.  If you already own a car, your policy should extend to any traditional rental. Check your policy before you head out on the road to make sure you are covered.

While many credit cards offer coverage, the policy is limited to collision which will cover the cost of the damaged vehicle but offers no liability coverage or medical costs. 

Zipcar – This car sharing service offers insurance to its members with each rental, but according to numerous news outlets, including the New York Times in a catastrophic accident, the coverage will almost certainly not be enough, which could end up costing you big.

Zipcar offers a combined single limit policy of $300,000 per accident for any driver that is 21 or older. This liability coverage covers the costs of property damage as well as bodily injuries if the Zipcar driver is found at fault. The coverage drops to state required minimum levels for any driver under the age of 21. In most states the minimums are woefully inadequate even in a minor accident.

Personal injury protection (PIP) coverage, which covers the medical costs for the driver, is included but only at state statutory limits. The car itself is completely covered by a comprehensive collision policy, as long as the Zipcar member is driving so don’t let your friends get behind the wheel.

Unfortunately, above these limits a Zipcar driver will personally be on the hook for the costs, which can be substantial, depending on the accident. Liability costs can easily run into the millions of dollars when a serious accident occurs.

In addition to limited coverage, Zipcar members are responsible for a $750 fee (it’s a bit like a deductible) for the following:

  • Third party claims
  • Vehicle damage for things such as scratches, flat tires, a drained battery, cracked windshields and any damage from vandalism or theft.
  • Damaged caused by acts of god like wind, flood and hail while you are using the car.

If the Zipcar member is over 21 and has not had an accident for at least the past 12 months they can buy a damage fee waiver which eliminates the damage fee. If the other driver is fully covered and found to be completely at fault you will not have to pay the damage fee.

The Zipcar agreement also spells out prohibited uses which will void your insurance coverage. Texting, emailing or using a cell phone are just a few activities that will put you on the hook for accident damages.

While Zipcar and other car sharing companies provide a much needed service you should be aware of the limitations in their insurance coverage. One catastrophic accident can put you on the way to the poorhouse.