Who Has Physical Damage Coverage in the Carsharing Economy?

Q: Is physical damage coverage included when an insured rents from TURO, a peer-to-peer carsharing marketplace, rather than a traditional rental car agency? The insured in question has physical damage coverage on his own personal auto policy.

A: The short answer is: If you have physical damage on an insured vehicle, yes, the insured is covered for damage to the rental vehicle—but only on an actual cash value basis.

But from an insurance perspective, using TURO appears very convoluted. So the longer answer is: In a traditional rental situation, the insured's PAP extends liability and physical damage to the rented vehicle on a primary basis, but the insured has the highly recommended option of purchasing a physical damage waiver to avoid the gaps that may result from the ACV-only coverage on the PAP.

Depending on the person from whom the vehicle is rented, this option may not be available with TURO. It appears that the person who owns and rents the vehicle has the option to make this protection available, but they aren’t guaranteed to do so. In situations where the car owner doesn’t provide the option, a separate, standalone protection package can be purchased from TURO.

From a liability perspective, it appears that the renter's insurance may not be extended on a primary basis; it may be excess, at least initially. But the contract appears to allow the owner of the vehicle to subrogate against the renter—once again making the renter's liability coverage primary.

Chris Boggs is executive director of the Big “I” Virtual University (VU).

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.