By now, most people are familiar with home-sharing concepts, like Airbnb and HomeAway. Fewer are familiar with similar services that allow car owners to privately “rent” their vehicles to others. The business pitch for these companies is roughly the same: earn money by loaning your vehicle to others while you aren’t using it. And, similar to the home-sharing services, there are many auto insurance implications you need to consider before allowing people you don’t know to drive your car.
Car-sharing services history
Like the home-sharing concept, the prevalence of smartphones and Wi-Fi have caused car-sharing services to increase in popularity. Electronic payments, apps, and the ability to find and book cars on the fly have made it easy for people who want to rent cars and people willing to loan cars to find one another. The money the “loaner” earns while someone is driving their car doesn’t hurt either — some of the car-sharing services use “make a dent in your car payments” as a marketing tool to coax car owners into signing on to their service. Renters get a deal too, as car-sharing services are typically less expensive than traditional rental car companies.
It should be noted that car-sharing services are different than ride-sharing services, like Uber and Lyft. While becoming a ride-sharing service, the driver does have insurance implications. In that capacity, you are driving your own vehicle, albeit for commercial purposes. In car-sharing, you are either loaning your own vehicle to another driver, or borrowing the car of someone unknown to you.
You can see which car insurance companies other consumers have rated as the best for rideshare insurance.
Loaners and your auto insurance policy
A previous article covered letting someone borrow your car — so, the question is: is loaning someone your car through a car-sharing service different?
The answer is yes, it is different. There are a number of differences, but the biggest one is that if you are loaning your car and receiving compensation for doing so, it is likely to be considered commercial use of your car. Many auto policies carry exemptions for commercial use — in which case, your insurance would not cover damages. Therefore, it is unlikely that your existing auto policy would cover any accidents if you loan your vehicle out as part of a car-sharing service.
If you are using a car-sharing service to rent a car, call your agent or carrier before your trip to find out if your insurance will cover your rental. This is a gray area, and many insurers are trying to grapple with the issues these services present and determine effective policies.
Car-sharing insurance provided by the service
Because of the limitations and restrictions on individual policies, most car-sharing services offer insurance for both parties: those who loan vehicles, and those who rent them. Again, it’s important to understand what the policies cover, what they do not cover, and any exemptions.
Here are some tips:
- For both parties: Know what the coverage is, and what the coverage limits are for collision, liability, and comprehensive.
- For renters: If you are renting a car-sharing car and the service offers different levels of insurance, make sure you understand what each level covers. If you have any questions, ask — and don’t choose to decline coverage unless you have spoken to your insurance company or agent first.
- For loaners: If you are loaning your car with one of these services, make sure you understand the point at which their insurance coverage becomes the primary insurance. Some services cover the rental period only — that is, only after the individual renting it drives off with your car. Others will cover the delivery period as well, when you are taking your vehicle to the agreed-to location for the renter to pick up the car.
- More for loaners: Make certain you understand the repair and replacement policies and restrictions.
- Even more for loaners: A note about liability coverage. All three of the major car-sharing services offer $1 million in liability insurance. This sounds generous, but could easily and quickly be exhausted if there is a serious injury or fatality caused by an accident in which your car was involved.
The sharing economy has much going for it, but insurers are still challenged with determining how to assess risk on a business model that is so new. Before jumping in with both feet on the attractive idea of making money when your car is idle, make sure you get all of the facts first.
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