Friday, September 8, 2017

What you need to know about insurance: Part 3

This last part of this series covers commercial insurance and other protections that an owner might enlist for financial security.

Alright, you're going to wet your feet in the car share economy but you're still wondering if there are any additional insurance angles you might look into.

The first thing I tried looking into was my own commercial insurance. I talked with folks form the major insurance companies Geico, Farmers, Amica, Liberty, Lancer Insurance and others.

So, You Want a Fleet of Cars

Commercial auto insurance is really aimed at the fleet owner, let's say twenty cars or more, and could be difficult to get if you don't already have some industry experience. The Commercial Insurance waiver offered by Turo is really targeted at an existing car rental company that sees an opportunity to expand their reach with Turo.

Let's now assume you are able to get commercial insurance. The added cost seems to make this a non-starter. Also, you lose several benefits including,
  1. Turo offers additional coverage to renters at the time they sign up to rent your vehicle, similar to a traditional car rental company.
  2. Turo acts as a kind of buffer in that they will take the responsibility of paying out your claim and separately will pursue the renter to collect whatever money they feel the renter is responsible for.
If you have your own commercial insurance,
  1. Turo will not offer additional coverage to renters of your vehicle.
  2. You will probably require renters to sign your own contract in which case you need to show up personally to have them sign and you may need a way to accept payment if you also provide insurance options.
  3. Your insurance provider is 100% responsible for collecting from the renter. 
  4. You may lose the optional benefit of receiving payment for loss of use while your car is being repaired. 
The main benefits to getting your own rental insurance are,
  1. Turo will take a smaller cut from each rental 
  2. You can negotiate higher levels of coverage with your own insurance company. 
  3. You won't need a separate personal auto insurance policy since both personal use of the car and rental use should all be covered by your commercial policy.
However, keep in mind that a commercial auto rental policy is considerably more expensive than a personal policy (until you get to a large enough fleet of cars). 

Of course, if you choose to go the commercial insurance route, you'll also need to create a legal business entity to do business under. For example, an LLC. However, be forewarned that while opening a business entity, getting your state business license, business insurance and paying your legal fees might not seem too difficult, my experience in shutting down the entity (should it not work out) was even more difficult.

While this might give you the piece of mind you're looking for in terms of personal protection, it will certainly add significant overhead to your operation. It is also a much bigger commitment and one that I doubt most people would be willing to make simply to kick the tires of renting on Turo. 

So, the steps are something like,

  1. Get a commitment from a commercial insurance provider.
  2. Form a legal business entity or use an existing one. Note - If you use an existing business entity, the entities current business insurance may be revoked so check with your agent. 
  3. Register your car under the name of your business. 
  4. Sign up for your new commercial policy
As you add more cars you will eventually reach the economy of scale that makes this worthwhile. Until then, whew!!!! 

Related posts:
What you need to know... Part 1 (as Owner)
What you need to know... Part 2 (as Renter)
What you need to know... Part 3 (Commercial Insurance)

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