How Risky Is the New Car Sharing Trend?
Transportation services have experienced a renaissance in the last decade. Ridesharing services have disrupted the taxi industry and electric scooters have appeared, disappeared, and reappeared in city streets. The most recent addition to this list: peer-to-peer car rental. Much like Airbnb, car sharing companies pair a “host” (car owner) with a “guest” (car renter).
With the growing popularity of remote jobs, more drivers are opting to rent out their cars for short periods. It’s an appealing offer: Your car could make you money while you work. These platforms also give renters opportunities to drive luxury cars unavailable through traditional car-rental agencies. Drop-off is flexible and convenient, and car renters can read reviews of the exact car they’re eyeing before their rental.
It sounds like a win-win, but there are some things that both hosts and guests need to know before jumping on the car sharing wagon, especially when it comes to insurance coverage.
Here are some of the risks involved with peer-to-peer car rental that could make for a bumpy ride.
Guest Risk: Insufficient Insurance Coverage
In the event of an accident when a guest is driving, who is responsible for damage? Every car sharing company differs, so you’ll need to read the fine print.
Typically, the guest’s personal auto policy is the primary insurance used for an accident during which the guest is at fault. Car sharing companies also sell optional secondary car insurance to guests, up to a set dollar amount.
Always call your Texas Farm Bureau Insurance Agent before signing a car sharing agreement. You don’t want to be caught by surprise that your policy doesn’t cover car sharing scenarios or that your coverage doesn’t match the value of the car you’re driving. For example, if your personal auto policy covers up to $20,000, your coverage policy payout will be a drop in the bucket if you wreck a luxury car worth several times that amount, in which case you’ll definitely want to spring for the secondary car insurance.
Car sharing companies may also charge guests extensive processing fees if an accident occurs, which can be hundreds of dollars tacked onto the trouble you’re already in.
Guest Risk: Safety in an Unfamiliar Vehicle
If you’re driving a host’s car, the host is responsible for any accident determined to be caused by a lack of proper vehicle maintenance. Even if you are not financially at risk in these situations, you could still be injured. There’s always going to be a level of uncertainty when you get in a car you’ve never driven before.
Host Risk: A Guest With Insufficient Coverage
The good news for the host is that, in the scenario above, their insurance policy is irrelevant. The bad news for the host? Their insurance policy is irrelevant.
Say, for example, you are the proud owner of a brand-new luxury car. If a guest’s personal insurance policy doesn’t cover the value of your car, it’s still up to the guest to pay the remaining balance. Damage to your car, other cars, and property can add up quick, and they might not be able to afford it. Recouping that money may be arduous — or impossible.
Host Risk: Lawsuits
Flat tires. Overheating engines. Recall repairs. If a guest driving a host’s car gets into an accident that is determined to be caused by a lack of proper vehicle maintenance, the host may be deemed responsible for both the repair and the damage. And their personal insurance policy may not cover the vehicle while being used for commercial use. If the guest sustained any bodily injuries in these instances, the host could also be in for a lengthy lawsuit.
Host Risk: Violating Your Policy Agreement
Your auto policy is designed to reflect your typical vehicle use. If that usage changes — say, because you’re loaning out your vehicle commercially — it fundamentally changes your policy, even when you’re the one behind the wheel.
The Future of Peer-to-Peer Car Rental
Car sharing is a relatively new industry. Lawmakers, car sharing companies, insurance agencies, and drivers themselves are all navigating uncharted territory, which comes with risks. To best protect yourself, give your Texas Farm Bureau Insurance Agent a quick call to make sure you have the coverage you need before loaning or renting a car sharing vehicle.
Learn more about protecting your vehicle from liabilities by browsing through these FAQs about comprehensive auto insurance.
Coverage and discounts are subject to qualifications and policy terms and may vary by situation. © 2021 Texas Farm Bureau Insurance
