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CyberEric
CyberEric Dork
2/4/23 9:44 a.m.

Hi all,

My community is thinking of buying a car and sharing it among multiple families. The question came up around insurance. Does anyone know how this works for insurance purposes? 

Can one person just insure it and have others drive it and be insured on their policy? Or does some sort of joint policy make sense? 

Anyone have first hand experience with this?

 

Racebrick
Racebrick Reader
2/4/23 10:08 a.m.

That is a good idea.  I don't know the answer, but I am interested to find out. 

Steve_Jones
Steve_Jones SuperDork
2/4/23 10:13 a.m.

Easiest, but not cheapest way is form a "community x llc" and title and insure it in that name. 

Apis Mellifera
Apis Mellifera Dork
2/4/23 10:19 a.m.

My first question would be what in the world is a community-owned vehicle?  Assuming it's exactly as it reads: a leave-a-penny, take-a-penny type of "ownership", you'd first have to find one poor sucker willing to insure it on their policy.  That person would get to enjoy a fraction of the full-ownership benefits, while retaining all of the liability.

The way to actually do it would be to form an LLC or similar, then the LLC buys the vehicle and insures it,  and finally the insurance company defines what drivers are covered.

Racebrick
Racebrick Reader
2/4/23 10:28 a.m.

But how do you make money? An LLC exists for business purposes, so you need to show a profit.

Steve_Jones
Steve_Jones SuperDork
2/4/23 10:45 a.m.
Racebrick said:

But how do you make money? An LLC exists for business purposes, so you need to show a profit.

Not at all. You can break even every year. At the end of the year the expenses were x. Everyone pays their share, and it's back to 0. Rinse and repeat. 

CyberEric
CyberEric Dork
2/4/23 12:02 p.m.

A community-owned car would be something we all put some money toward. We would all be able to drive it. We live in a rural community and most people are using their cars about once a week to go to town to buy food and run errands. Lots of redundancy and the cars are not getting used enough. This would hopefully solve that while keeping costs down for individuals. No sense in owning, maintaining, and insuring a car you drive once a week.

So I'm hearing we could form an LLC and just break even every year and insure it through the LLC. Gotcha. I thought the LLC had to show revenue. Guess not. 

Just to explore another idea....What are the rules for driving someone else's car on insurance policies? Does anyone know? One thought I had is someone might be willing to take on the liability and then we self insure. 

SV reX
SV reX MegaDork
2/4/23 12:33 p.m.

In reply to CyberEric :

I suppose it might be different with the folks in your community, but there is no way I'm letting someone else drive regularly on my insurance policy. I'm not taking on your liability. 
 

Every fender bender or claim of any kind would jack up my insurance rates. And eventually, it's possible my insurance company could drop me. 
 

Form an LLC. Then the responsible party is the LLC, not an individual. 

John Welsh
John Welsh Mod Squad
2/4/23 12:53 p.m.

Myself, 9 years in the Medical Transport Business with a fleet of vehicles and drivers.  My business was an LLC.  We were required to hold a commercial insurance policy which is not something you get from Geico, Progressive, Liberty Mutual.  Find an independent agent who specifically does commercial policies.  I should add that this costs far more than something you might get from the "mascot" companies named above.  My policies were also what is know as "named driver policies."  As that implies, the policy only covered specific individuals to drive the cars.  Annually, I had to provide driving lisences and records of those individuals.  If an individual's driving record got overly tarnished in that year, I'd really need to let them go from working here because they would unevenly raise my rates so high that keeping them around was not cost effective.  If that person had a major offense like a DUI, the insurance company might just straight out tell me that they can no longer be one of the named driver's.  

As I think a little more, in some Rural Ohio, not far from me we have an Amish Community.  We simplistically call them Amish but they are really a Mennonite sect. (think as Amish light.)  At their church they keep about 6 black sedans.  It seems these sedan are used to move the congregation.  That movement seems to include the running of normal life errands, not just travel to/from church.  This group seems allowed to drive but only in modest ways so the sedans are always black and Impalas, Taurus, ect but plain trim models.  I would suspect that the church (a tax exempt business) is the owner of the cars.  

With all that said, is your community all of one popular religion?  Even if not, I suspect it is not that hard to form a church (a tax exempt business.) 

But, to recap, yes an LLC and some commercial insurance is likely the way to go.  Just the "average Joe" policy from the mascot companies will not meet your needs.  Or, if those companies find out that you are regularly and systematically allowing the driving by non family they will likely drop you and/or deny coverage. 

codrus (Forum Supporter)
codrus (Forum Supporter) GRM+ Memberand PowerDork
2/4/23 1:47 p.m.
CyberEric said:

So I'm hearing we could form an LLC and just break even every year and insure it through the LLC. Gotcha. I thought the LLC had to show revenue. Guess not. 

The LLC would have revenue in the form of the money that folks kick in to cover the expenses.

There's some tax requirement that certain businesses have to show a profit occasionally or they get reclassified as hobbies by the IRS.  AIUI that only applies to the kinds of businesses that you run on your personal tax return (sole proprietorships?), and is basically to prevent people from writing off too much stuff -- anything with corporate papers will be a business.

There was a running joke in the 90s that Apple was about to get reclassified as a hobby because they'd lost money too many years in a row.  How the times have changed for that company. :)

Making a corporation for this will come with a certain amount of overhead.  Laws vary, but there's probably a fee from the city, it will need officers, a charter, a business address (PO box?), and to file taxes.  I'm told one should figure a couple thousand dollars a year as the minimum cost to run one.  That said, I agree that it's the right answer for this situation.

 

Oapfu
Oapfu GRM+ Memberand Reader
2/4/23 2:18 p.m.

No idea if it applies here, but for 'simple' shared ownership there is a thing called a Revocable Living Trust.  RLT probably has less overhead vs a LLC, but I have zero idea about insurance.

OHSCrifle
OHSCrifle GRM+ Memberand UltraDork
2/4/23 3:16 p.m.

What kind of company car will you LLC own?

Duke
Duke MegaDork
2/4/23 3:20 p.m.

You could also form a nonprofit organization. You don't have to spend every dollar the organization makes, so you could build up reserves for repair and replacement.

it shouldn't be any harder or more expensive than an LLC.  But revenue would be tax free.

 

 

Rons
Rons GRM+ Memberand HalfDork
2/4/23 4:19 p.m.

Here is a link for a car share co op it's way bigger than your set up, but they may respond with some thoughts and ideas as I don't believe they're preprogrammed as shiny happy people.

https://modo.coop

CyberEric
CyberEric Dork
2/4/23 4:57 p.m.

Thanks everyone!

@JohnWelsh, the church idea is interesting. There is some religious overlap. Hmm....

@Codrus, yeah I'm concerned about the amount of overhead for just a few families/individuals. Although we do have a CPA in the mix. Maybe he would do all the paperwork.

@OHSCrifle, not sure yet. Hopefully a Miata. :) 

@Oapfu, Thx! I'll check out the Revocable Living Trust. 

@Duke, I like the idea of forming a non-profit. I wonder if insurance would work for a car owned by a non-profit. If I can get an insurance company to insure a car for a np, that sounds ideal. 

@Rons, thanks. Yeah maybe they would have some ideas.

Duke
Duke MegaDork
2/4/23 6:04 p.m.

In reply to CyberEric :

Our car club is a nonprofit corporation and we have vehicle insurance on our trailer.

 

CyberEric
CyberEric Dork
2/5/23 3:49 p.m.

In reply to Duke :

Great to know, thank you!

Curtis73 (Forum Supporter)
Curtis73 (Forum Supporter) GRM+ Memberand MegaDork
2/5/23 8:02 p.m.

We did a similar thing in college.  I lived in a house with three other guys and none of us needed a car very often.  Just dates, home for a weekend, go to the beer store, etc.  We chipped in and bought a cheap Cavalier.  In our case, one of us insured it and listed the other three as drivers.  When the bill came in, we split it.  It was all legal and kosher.  I'm sure an insurance company might raise an eyebrow if you start adding 15 drivers, and I don't know how many are in your community.  In our case it worked well, however there was just a gentlemen's agreement.  There wasn't any protection for any of us if one guy decided to screw us and stop paying, or get caught with a hooker and some blow in it causing it to be impounded.  That never happened, but it could have.  We just got lucky cause we were all fine, upstanding citizens.

Suggestion:  Call an insurance company that you don't necessarily intend on using.  Ask them.  They might hang up, or they might be super generous to earn your business.

I do know that some companies and states have different rules.  Some situations require listing drivers, and their records will be pulled and vetted as part of your rates.  That is to say, if your company requires that you list drivers and someone is driving it that is NOT on that list, they don't cover damages if they have any.  Some companies aren't as picky.  The way my policy reads, anyone can drive it if I'm with them in my own vehicle, and some combination of "close relatives, spouses, children and dependents," may drive it without me in the vehicle.

My only concern with the LLC is the setup effort and cost for the LLC itself, the additional tax filing for a company, and it also (likely) drops you squarely into commercial insurance... which could mean a couple extra bucks, or it could mean wildly different premiums.

 

Apis Mellifera
Apis Mellifera Dork
2/6/23 9:16 a.m.

In reply to Johnysmith99 :

I just spent more than a few minutes wondering what kind of spam this post is and had nearly decided it wasn't, but rather simply a post by a well-read lunatic.  Then I noticed the red period after the word 'policy'.  It's a hidden link to a classic we-promise-we're-not-a-scam website - this one offers phantom laptops.  Is this AI or a real, live human?  Whichever heartless machine it was, the link code must be wrong because hiding the cheese doesn't seem like a good way to catch mice.

 

Back to the insurance, assuming everyone currently has an insured vehicle, I think Curtis might have suggested a reasonable LLC-less solution.  Have everyone consult their insurance providers with what you have in mind.  See what they say.  You probably won't get anywhere with a national chain, but a local provider might be willing to write a policy for either the whole group or several smaller family-sized groups.  If someone in the group has access, I would recommend USAA, they are very accommodating.

ProDarwin
ProDarwin MegaDork
2/6/23 9:20 a.m.
Apis Mellifera said:

In reply to Johnysmith99 :

I just spent more than a few minutes wondering what kind of spam this post is and had nearly decided it wasn't, but rather simply a post by a well-read lunatic.  Then I noticed the red period after the word 'policy'.  It's a hidden link to a classic we-promise-we're-not-a-scam website - this one offers phantom laptops.  Is this AI or a real, live human?  Whichever heartless machine it was, the link code must be wrong because hiding the cheese doesn't seem like a good way to catch mice.

Wow, that is an impressively stealth canoe.  Even the spam is stealth.  weird.

SKJSS (formerly Klayfish)
SKJSS (formerly Klayfish) PowerDork
2/6/23 9:27 a.m.

I would be stunned if any personal lines carrier wrote this.  They are for specific individuals (families) at a specific location.  They don't want 20 different drivers living in 14 different locations.

You will need to get a commercial insurance policy, which means you will need a business of some sort.  However I'm not even sure a commercial carrier would write it.  You'd have to show them you are some sort of business, not just a group of people who form an LLC for the sole purpose of sharing a car.

Duke
Duke MegaDork
2/6/23 10:10 a.m.
ProDarwin said:
Apis Mellifera said:

In reply to Johnysmith99 :

I just spent more than a few minutes wondering what kind of spam this post is and had nearly decided it wasn't, but rather simply a post by a well-read lunatic.  Then I noticed the red period after the word 'policy'.  It's a hidden link to a classic we-promise-we're-not-a-scam website - this one offers phantom laptops.  Is this AI or a real, live human?  Whichever heartless machine it was, the link code must be wrong because hiding the cheese doesn't seem like a good way to catch mice.

Wow, that is an impressively stealth canoe.  Even the spam is stealth.  weird.

People don't have to actually follow the link.  Just having the link hosted on a legitimate website for a length of time helps keep the link from getting blacklisted.

 

z31maniac
z31maniac MegaDork
2/6/23 8:07 p.m.

I just see it causing all kinds of logistical/financial issues. 

Especially financial, car needs maintenance, when 1 person says "I only drive it 10 miles per week, and X drives it 50 miles per week, why should I have to pay as much." Or someone gets in an accident, is everyone expected to chip in on the deductible, etc. 

 

ProDarwin
ProDarwin MegaDork
2/6/23 8:54 p.m.
z31maniac said:

I just see it causing all kinds of logistical/financial issues. 

Especially financial, car needs maintenance, when 1 person says "I only drive it 10 miles per week, and X drives it 50 miles per week, why should I have to pay as much." Or someone gets in an accident, is everyone expected to chip in on the deductible, etc. 

 

I'm guessing in most multi-family/co-op/commune scenarios this is not a problem

Gearheadotaku (Forum Supporter)
Gearheadotaku (Forum Supporter) GRM+ Memberand UltimaDork
2/7/23 12:29 p.m.

I've often wondered about doing this with a trailer.

Most of us only need a car hauler once in a while but rental units usally suck and get pricey fast.

So if a group all pitched in and bought something nice then whoever needed it just picks it up from the agreeded upon storage and returns when done. A little work would have to be done for scheduling and maintinace needs.

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