The phenomenon of car-sharing continues to gain momentum across the country. What started with companies like Zipcar, which allows members to temporarily rent vehicles, has resulted in applications like Lyft, which allows car owners to temporarily act as cab drivers for customers requiring a ride. Another service called Flightcar allows car owners to "volunteer" their car as a rental vehicle for someone else.  

The idea of car-sharing appears to be most popular with younger Americans. According to CNN, the number of 18- to 34-year-olds who purchased vehicles fell 30 percent in recent years. Additionally, as more people living in urban areas struggle with high gas prices and limited parking spaces, the idea of only using a car-sharing service when you absolutely need a vehicle is attractive.

In fact, 26 different U.S. car-sharing programs claimed 806,332 members, according to as of July 2012.

Of course, along with the brave new world of car-sharing come many potential risks, not the least of which is proper insurance coverage.

Insurance questions to ask

Before getting behind the wheel of a vehicle from a car-sharing program or allowing your vehicle to be used as part of such a service, it's essential to understand what is covered and where you may be at risk. Ask yourself the following questions:

Am I covered?

Car-sharing is a relatively new phenomenon, and many insurance companies exclude coverage for car-sharing. Contact your insurance carrier to find out if your coverage extends to car-sharing, and if so, how much coverage can you rely on.

Do car-sharing services provide coverage?

Most car-sharing services will make insurance coverage available to their customers, and some may even require you to purchase the coverage they offer.  However, this coverage typically only goes up to a certain dollar amount, meaning that if you are involved in a serious accident, you may be liable for repair or medical costs out-of-pocket. It's important to find out exactly what and how much the car-sharing service policy covers.

What's the law in my state?

Since car-sharing services are fairly new, some states may not have any laws governing insurance practices for the service. Still others may require drivers to have adequate insurance in place before getting behind the wheel. Know what the law says in your state.

What's my risk factor?

If you're planning on allowing your car to be used by others, or are planning on acting as a chauffeur through a car-sharing service, you need to understand how commercial use of your car increases risk factors and impacts your coverage with your insurance carrier.

Insurance policies also require you to inform your insurance company of changes in exposure, such as participating in a car-sharing service, during the policy period.  If this information is not disclosed and an accident occurs it is likely you will be left exposed and any claims will be denied.

Am I liable?

If a person is injured while using your vehicle, or while you're driving them around, who is liable to pay for repair bills and possibly medical costs? Understanding liability issues based on different car-sharing scenarios is very important.

While a number of issues can arise from car-sharing, the most important thing is to understand your exposure before getting involved with a service. Failing to understand your coverage can lead to financially devastating results.  Discuss your options with your HUB broker to ensure you make a fully-informed decision.