Car subscription insurance: everything you need to know
Car subscriptions are long term car rentals you sign up for using an app. You get more flexibility and convenience than buying, leasing or renting, but insurance for car subscriptions can be confusing. We've pulled together the answers to the questions our customer most often ask.
Car subscriptions are long term car rentals you sign up for using an app. You get more flexibility and convenience than buying, leasing or renting, but insurance for car subscriptions can be confusing. We've pulled together the answers to the questions our customers most often ask.
What is a car subscription or long term rental?
There are lots of different ways to get a car these days. When we talk about car subscriptions, we mean a rental that lasts more than 28 days. This is really just a long term rental car, but often when people talk about car subscriptions, they also mean that they are renting from a company that has an app based longer term rental sign up, rather than a traditional rental car counter.
How is a car subscription different from a short term rental?
The difference between a car subscription and a short term rental is really just the length of time you’re keeping the car for. A short term rental is usually less than a month. While you can usually cancel a car subscription at any time, it rolls over month to month until you choose to do so.
Is the insurance for a car subscription the same as for a rental car?
No, the insurance that works for a regular rental car won’t work for a car subscription. The reason is the timing. If you rent a car, say, at the airport rental car counter for a week, you have a few options for insurance. If you have your own car and your own car insurance, usually that will cover your liability when you drive a rental car in the US or Canada. And, if you have comprehensive or collision to cover your own car, that will usually cover a short term rental.
If you don’t have your own car, you can either buy liability coverage from the rental car company, or, if you rent a lot, a non owner can insurance policy (driving insurance for people who don’t own cars) will probably be cheaper for you. For physical damage to the car, you can either buy from the rental car company, or, if you have a premium credit card with a collision damage waiver benefit, you can use that to pay for your rental and you should be all set.
The issue is that neither your own car insurance nor coverage on your credit card is intended for cars you drive regularly that aren't listed on your policy. That means the coverage may only extend to driving a specific car for a certain number of days (generally less than a month). And it may not cover you at all if you sign a lease for longer than that period, no matter when in the lease you get into an accident. And insurance from the rental car company is generally very overpriced for longer periods of time.
That’s because car insurance is priced taking into account your risk as a driver and the cost to fix damage to the specific car you’re driving. And if you have a car for a longer period, the insurance company wants to charge you the right rate.
Despite the difference in names (and the lack of an app, usually!), for a long term rental car you actually need the same kind of insurance you’d buy to cover a leased car. And that’s…just a regular car insurance policy!
Is insurance for a car subscription the same as for a leased car?
Yes, the insurance for a car subscription is the same kind of policy you need for a leased car. This may be confusing to find for a couple of reasons.
- First, since subscription car services are relatively new on the mobility scene and pretty small compared to giant leasing operations, the insurance company or agency you try may not be clear on what they are. They may assume you are renting a car, and may tell you to go talk to the staff at the counter…except there is no counter!
- Second, even if they understand that you are talking about a long term rental, there is some additional information they need to set up the policy correctly. For example, they need the name and address of the company that owns the vehicle. That may or may not be the name on the app you rented from, and it’s unlikely to pop up in their system like the large car manufacturer’s leasing programs will.
- Finally, they’ll often need documentation like the window sticker for the car, or a copy of your lease agreement, which looks different from what they usually see. New economy, you know!
Does insurance for a long term rental cost more or less than if I owned a car?
Insurance for a long term rental or subscription car probably costs about the same as if you owned the car. Insurance companies sometimes have slight discounts for a car you own outright vs leasing or having a loan, but it’s generally a minimal difference.
Is insurance included with a car subscription or long term rental car?
Insurance is sometimes included with car subscriptions, although more and more subscription companies are moving to a bring your own insurance model.
If you’re going to get insurance straight from the company, make sure you understand two things:
- Are liability insurance and physical damage insurance both included? Liability protects you if you get into a crash and are legally responsible for injuring someone else or damaging their car or property. Physical damage insurance covers the car itself
- How much coverage is there? Pay attention to the liability limits. If you have a decent job and/or a college education, you want at least $100,000 per person, $300,000 per accident, and preferably more – in most states you can be sued for your future earnings. Also pay attention to the deductible or damage fee if there’s damage to the car. It can often be $1000 or more.
Is enough insurance included with a car subscription?
From what we’ve seen, the answer to this is usually no. We worry especially about the liability coverage, since we often see platforms including the minimum the state allows. Depending on the state you are subscribing in, that may be as low as $10,000 per person/ $20,000 per accident.
That may sound like a lot of money, but imagine this totally typical situation: You’re driving on a wet afternoon on the highway, and traffic suddenly stops in front of you. You rear-end the car in front of you (which most of the time means you are legally at fault). The airbags deploy, and all four passengers are stunned by the impact. Out of an abundance of caution, ambulances take them to the hospital for scans and observation.
How much do you think four ambulance rides, four ER visits, plus any diagnostic scans, etc. will cost?
And what if any of them need treatment? At least $80,000? If you have $10,000/$20,000 state minimum insurance, your insurance will pay a maximum of $20,000, and the passengers or their health insurance company will sue you for the rest.
You might think, well, I don’t own anything of value, I just graduated from school, etc. The issue is that you can be sued for your future earnings, and if you’re relatively young, your lifetime earnings ahead of you is a surprisingly big number.
We recommend at least $100,000 per person/ $300,000 per accident to all of our customers, and preferably more. So check – the subscription companies usually explain their insurance coverage in their FAQ or help sections.
How to buy insurance for a long term rental car
If the company you’re getting your subscription car from doesn’t offer insurance, doesn’t offer enough, or the price is sky high, you’ll need to shop. And you can buy insurance through an insurance agent, who can usually get you multiple quotes from different insurance companies.
Or, you can go directly to any of the big-name insurance companies you see advertisements for. You might want to call to make sure they can set up your policy correctly, and make sure you know if there are any insurance requirements your subscription company has. Usually, there are minimum coverage levels and maximum deductibles that the subscription companies will consider acceptable.
What insurance paperwork do I need when my car subscription is delivered?
Usually, your subscription company won’t deliver your car unless you’ve already provided them with proof of adequate insurance. Just in case, though, you may want to have a copy of your declarations page from your insurance policy ready. That’s usually one of the first few pages of the packet you’ll get from the insurance company. It’ll lay out how much coverage you have as well as any deductibles.
Also, print a copy of your ID cards. These are wallet-sized “cards” that will also be in the packet you get from the insurance company. Throw them in the glove compartment. In many states, they serve as proof that you are insured if you’re involved in a crash, and they have the insurance company’s contact information if you need to report a claim.
How do claims work for a long term rental car?
You’ll usually want to make two calls – one to your insurance company to report the claim, and one to the subscription car company to tell them about the claim. The insurance company will manage the claim exactly the same way they would if you owned the car, though they may also talk to the subscription company in some cases (like if the car is totaled).
Is my subscription cheaper if I bring my own insurance?
Sometimes it is, and sometimes it’s not. This really depends on how much coverage you want, what kind of deal the subscription company has on insurance, and how many quotes you get from other carriers. If you have a choice, it’s usually worth shopping to find out. We’ve seen pricing differences in the $1000s of dollars/year.
My insurance company wants me to buy a six month policy, but my car subscription is month to month - what do I do?
Car insurance is usually only sold in 6 month or 12 month increments. Usually, though, you can cancel at any time and get a pro-rated refund on a personal auto insurance policy.
Just ask to make sure there are no fees, and that cancellation is pro-rata (not something called short rate, where the insurance company keeps more of the premium if you cancel early). Then just buy your 6 month policy, and, if you decide to end your car subscription, call and cancel your insurance policy too.
What makes insurance more or less expensive for a car subscription?
Insurance for car subscriptions is priced the same way car insurance is. Your driving record, where you park the car at night, how much coverage you buy, what kind of car you’re insuring, whether you’ve had prior continuous car insurance, and your credit score (in most states) all play a role.
And, since every car insurance company uses a different algorithm for pricing, your best bet is to get several quotes for the exact same amount of coverage and deductibles and compare them.
If I buy a car, can I keep the same insurance policy I have for my car subscription?
Yes, you usually can! Just ping your agent or insurance company, have them add your new car when you get it, and remove the car subscription. The price may change a bit, but your policy information should stay the same.
Did you know we partner with Kyte and GO to provide insurance to their car subscribers?
Check out our information on insurance for long term Kyte subscription cars and insurance for GO un-lease subscription cars.