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Twists and turns in ride- and car-sharing insurance

For many people who own a vehicle and have the time, the idea of renting your car to others (car-sharing) or providing rides for money (ride-sharing) seems like a no-brainer. And for people who use these services, it can be a cost-effective way to get around.

With the help of new technology services such as Uber, Lyft and Sidecar (ride-sharing services) and FlightCar, GetAround and RelayRides (car-sharing), this industry is among the fastest-growing in America and around the world.

But as the debate over how to regulate them rages, insurance companies want people to understand what your personal auto insurance policy doesn't cover. A major issue is liability: When a car is involved in an accident while being used in a car- or ride-sharing service, who pays?

According to the Insurance Information Institute, a standard personal auto policy for a vehicle you own and use personally won't provide any coverage for any time the vehicle is used for car- or ride-sharing. Your coverage typically stops the moment a car owner logs into a ride-sharing app, and doesn't resume until the customer/rider has exited and the transaction is closed.

Similarly, if you rent your car to strangers, a typical personal auto policy doesn't cover it.

To be clear, your personal auto policy does typically cover anyone who drives your car with your permission (rather than renting it) and the drivers living in your household.

According to some insurance industry reports, some insurers view car-sharing services as high risk and may cancel or refuse to renew a driver's policy. For this reason, most person-to-person car-rental services provide commercial auto coverage when someone else is driving your car in exchange for money.

If you're enrolled in a ride- or car-sharing service, make sure you understand all this -- otherwise, you're just one accident away from significant financial liability.

Ask your sharing service what level of coverage it provides. For example, Lyft says drivers and passengers are covered by its $1 million commercial liability policy during the time they're matched on Lyft's platform. Uber says all rides on its platform are covered under its corporate insurance. Once you get the coverage details, contact your personal insurer to discuss any gaps. You may be advised to purchase a $1 million excess liability policy.

A number of state insurance regulators have also raised concerns that passengers are taking a risk when they use ride-sharing. If you're hurt in an accident while using one who's driver is underinsured or uninsured, you won't be able to recover your damages.

For these reasons, some insurance companies now offer new ride-sharing-friendly policies. Earlier this year, Erie, USAA, Progressive and GEICO announced affordable policies that cover the driver and rider during the ride-sharing transaction.

But don't expect every state to have these policies because some are slow to approve them under their regulations. For example, GEICO's Ridesharing Insurance is currently offered in Georgia, Maryland, Pennsylvania, Texas and Virginia. The USAA policy is available in Texas and Colorado. And in March, Progressive announced an exclusive program for Lyft drivers in Pennsylvania, but Uber drivers there can't sign up.

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