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Zipcar, RelayRides and Car Insurance

As a graduate of AngelPad and a budding startup, CoverHound is very much a part of the Silicon Valley ecosystem. We therefore keep our fingers on the pulses of several startups, especially as they relate to car insurance. Many new car rental sites have sprung up in the last few years, offering a whole set of new options to consumers. But with these new driving opportunities come a new bunch of questions about how car insurance works for each. We hope to answer those questions below.

[Zipcar]( While not that new to residents of Cambridge, Massachusetts (where it was founded) and San Francisco (where its popularity spread quickly), the company is now beginning to attract short-term car renters across the country. And by now most people know the company’s value proposition: Cars are stationed in thousands of parking lots -- within walking distance for most American city-dwellers -- and they can be rented for short period’s of time on the company’s website.

But with new markets come new insurance questions. Zipcar requires drivers to become members; the cost is an annual fee below $100 and includes $300K per accident in liability coverage for drivers over the age 21. There is, however, a $750 deductible for any repair to -- or loss of -- a Zipcar. The $750 deductible remains in place for all “at-fault” or “no-fault” accidents. For those “Zipsters” who drive a lot, you might want to consider buying no-liability car insurance for an extra $75 a year. Zipcar provides car insurance at state-mandated levels for member drivers under the age of 21.

[RelayRides]( The new kid on the block in terms of micro-rentals, RelayRides was founded in 2010. The big difference between Zipcar and RelayRides is that the latter doesn’t own the cars; instead, it’s a peer-to-peer model. In other words, you can pay to use someone’s car, and anyone can pay to use yours.

Of course this interesting model opens up all sorts of questions about car insurance. RelayRides seems to have a good handle on it; the company provides supplemental insurance that covers the car borrower during his/her reservation. Car owners needn’t do change their insurance at all on RelayRides; the company even provides a $1,000,000 liability package insuring any damages for the owner. Further, if the person borrowing your car gets into an accident, your car insurance rates will remain unaffected because the car is insured by RelayRide’s policy while it is driven by the borrower.

While there are a handful of other micro-rental companies, we focused on ZipCar and RelayRides because of the unique challenges their models pose from an insurance perspective. Regardless, it's definitely exciting to have all these new car rental options open to drivers.

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