In a perfect world, rentals and car-sharing would always go exactly as planned. You’d book your car, pick it up, and bring it back good as new.

But life doesn’t always work that way. And when it doesn’t, and you’re looking at a caved-in fender or worse, you’ll quickly learn all about the insurance coverage you bought – or maybe didn’t.

Insurance got a bad rap in the days when car rental companies piled on every extra they could. As a result, some people go for the absolute minimum – or even decline it, figuring they’re covered somehow. In a worst-case scenario, that could cost you everything.

HeapMedia358131

Car-sharing company Turo launched in Canada in 2016, but only after it set up its insurance policies. “One of the reasons we took so long was to be sure we had the insurance,” says Cedric Mathieu, director for Turo in Canada. “We’re trying to eliminate the upsell on insurance, but we recommend that (users) buy the right protection level, and we give them the information to make the right decision.”

So what is the right decision? It’s important to know what each type of insurance is, and what it covers. We’ll use Turo as an example here, but the information is similar to any commercial rental company.

Liability Insurance – This is the big one, and yes, you need it. “Think of liability as anything that’s outside of the car you’re driving,” Mathieu says. That means injury to pedestrians, cyclists, or other drivers; damage to other vehicles; or damage to property, such as if you go through someone’s fence.

Turo sets its liability at $2 million, and we agree. It may seem like a huge sum, but the courts can eat that up in a heartbeat if someone is seriously injured. If a rental agency’s minimum is less than $2 million, we suggest paying the difference to bring it up, especially if you’re renting in the U.S. where lawsuits can really go over the top.

Collision and Comprehensive – These can be offered individually by some insurers, although they’re usually bundled together. Turo refers to it as “Property Damage Protection.” Some insurance companies refer to the pair as “All-Perils Coverage.”

These plans cover the vehicle you’re driving. Specifically, collision insurance pays for repair or replacement if it’s in a crash, including a single-vehicle collision, such as if you hit a pole. (But please don’t.) Comprehensive insurance covers the vehicle for non-collision damage, such as if a tree falls on it, or someone steals or vandalizes it.

Priority of Coverage – If you own and insure a vehicle, that plan may cover you when you’re driving a rental vehicle (more on that in a bit). If so, the rental agency may require that the claim be paid out by your insurance policy, before you use the agency’s coverage.

Deductible – If a deductible applies to your coverage, you have to pay a specified amount toward the repair. The lower the deductible, the more expensive the plan will be.

It’s tempting to go for the lowest price, but be realistic: if something happens and you’re hit with a $3,000 deductible, do you have the cash? If not, it could go to a collection agency, and that will affect your credit rating. The insurance only kicks in for repairs over your deductible. If you have a $3,000 deductible, but the repair is only $2,000, you have to pay that two grand.

So is it possible you might be covered, without the need to pay extra? The answer is “maybe.” As we mentioned, if you own and insure a vehicle, you may have what’s commonly known as “non-owned coverage.” As it sounds, this is protection when you’re driving someone else’s ride. Check with your insurance company before you rent, and be sure you know exactly what’s covered, including the amount of liability.

You may also be covered if you pay for the rental with a credit card that includes such a plan. Once again, check before you sign on the dotted line or tap the app. And don’t just take the card representative’s word for it. You want to see it in writing, outlining exactly what’s covered and for how much, and keep a copy of it.

HeapMedia358132

Once you have your rental, use your smarts. Don’t put anyone behind the wheel who isn’t authorized. “If you want to have someone else drive the car, you need to have that person in the reservation,” Mathieu says. “If not, and something happens, it will void the protection from Turo. You will be responsible for the full damage.”

And while it goes without saying, if you’re driving drunk or high, you’re going to be on the hook for whatever damage you cause.

If you’re considering renting your vehicle through a peer-to-peer service, do your homework as well. Turo covers you for everything, no matter who damages the vehicle, Mathieu says, because you’re automatically covered by Turo’s insurance program as soon as someone selects your vehicle on the app. However, you should let your insurance company know. “You don’t have to tell them every time you rent it out, but we advise that you call before you enter the program,” Mathieu says.

Whether you’re renter or the “rentee,” don’t go in blind. Don’t assume that you’re covered for anything until you see it in writing, and keep copies. Know what’s covered, what you’ll owe, and what to do if something goes wrong. Most of the time, nothing bad happens. But it only takes a split second for a crash to change someone’s life – and you need to be sure you’re protected if it does.