Peer-To-Peer Car Rental Insurance
You can’t deny that your car is one of your valuable properties that costs you a lot of money every day. Owning a car requires you to purchase gas whenever you travel using your car. It also requires you to pay for its maintenance so it won’t be damaged as time passes by. Let me ask you this question. What if you could earn from your own car instead of using your money for its maintenance, loan payments, insurance, depreciation, and all other kinds of things for your car?
Before getting into peer to peer car sharing as a renter or owner, think about coverage issues carefully…
If you own a mobile car that usually remains parked most of the time and needs some extra cash or if you are eager to rent a vehicle for less without heading to the farthest airport, you could be a prime candidate for peer to peer car sharing. This is becoming an increasingly popular peer-to-peer practice wherein a person rents out their privately owned vehicle to a stranger who will use their car for a short period and for a predetermined fee.
You should, of course, be ready first before you rent out your personal car, particularly getting auto insurance for this kind of service. Without proper coverage, you could suffer consequences such as medical bills, repair costs, and property damage fees.
What is a Peer-To-Peer car sharing model?
So, first and foremost, what is a peer-to-peer car sharing model? Peer to peer car sharing is also called “person-to-person car-sharing and peer-to-peer car rental. This is the process wherein current car owners lend their vehicles for other people to rent for short periods of time.
Peer-to-peer car sharing is also a new approach to the industry of car sharing where car owners rent their own personal cars to other people in their location. This is the next step of more reachable or affordable cars for rent in the modern sharing economy.
When you do not use your own car and instead of them being parked in your driveway or parking lot, you can earn money from your car by lending or renting it to someone who needs a vehicle. Peer-to-peer car sharing is also a kind of person-to-person car-sharing. With this method, you can directly rent a car from its owner and make your own agreements with the owner themselves according to your needs.
This is the future of mobility and transportation.
This future of mobility will bring many changes to the auto industry. Mobility is an essential part of society since people need to go to work or school, visit friends or their family, or even explore or travel to different places. Peer-to-peer car sharing is one of the changes and improvements in mobility.
Peer to peer startups is included in a group of online organizations that helps the growth of the sharing economy.
These people provide an internet platform where different interested car owners list their cars for rent and also clients who are able to look for an appropriate vehicle for their needs. This peer to peer car sharing is similar to Airbnb or what you call Couchsurfing websites wherein people share apartments for rent.
In the age of the internet, the growth of social networks and smartphone technology has greatly influenced the development of peer-to-peer car sharing. The sharing economy is one of the main factors or elements in modern society. We also can’t deny that peer-to-peer car sharing is also part of it.
Peer to peer car sharing is a great opportunity for car owners who do not always need a car and for renters too who do not need car ownership.
It helps car owners to contribute to the sharing economy and this also offers a place where car owners can help other people to drive a vehicle since they do not own one themselves. Many studies concluded that most of the cars are just usually parked 95% of the time, so with help of peer-to-peer car sharing, it helps both car owners and people who need a car.
Peer-to-peer car sharing is facilitated by third-party services. These online networks are accessible by websites or smartphone apps to match potential renters with owners choosing to loan out their cars in specific markets throughout the country. The following said services perform background checks on each potential vehicle owner and renter to ensure that they have clean records and auto insurance before they could lend the car.
Peer-to-peer car sharing is a better alternative.
Peer to peer car sharing services can be a much better alternative than their conventional options such as Hertz, Avis, and also Zipcar. According to RelayRides, their average renter saves about 30% compared to traditional car rental companies and the average active owner earns about $340 during the month of February 2015.
Please note that peer-to-peer car sharing is not similar to “ridesharing” services. Ridesharing services are the practice of using the mobile apps provided by companies like Uber, Lyft, and Sidecar to connect drivers of their own cars to hire passengers looking for transport.
Peer-to-peer car sharing has bloomed as an alternative to basically renting a car. This has a similar business model to Airbnb or Uber. However, please note that they also have differences between them.
This service allows car owners to rent out or basically lend their vehicles to possible renters or individuals within a given area through a mobile application. To provide this kind of service, different online platforms’ goal is to make it easier or smoother and less expensive to rent a car.
Peer-to-peer car sharing has ease of access.
Possible renters using these apps do not necessarily need to wait for car rental centers and spend their time waiting in line before their documents and credit card information are processed. They can easily pick up the vehicle at the curb for a less expensive price than traditional car rental companies. Such platforms can also give an advantage to car owners since they can maximize the value of their unused cars.
Of course, this comes with controversy. First, users of this app may rent a car that is for recall and may be unsafe to use. Possible renters should check the Vehicle Identification Number of each car that they would rent to make sure that the car is safe to use. There are some cases that the car was just involved in an accident so it is important to always double-check with car owners that the car has not been involved in any car accident recently.
Peer to peer car sharing: A Smart Idea
Peer-to-peer car sharing is a kind of person-to-person lending or collaborative consumption as also part of the sharing economy in the United States. This kind of business model is also related to traditional car clubs like Streetcar or Zipcar in 2000. However, peer-to-peer car sharing replaces a usual fleet with a virtual fleet that is composed of vehicles from owners who are participating in this kind of business. With this, participating car owners charge a fee to rent out their vehicles when they are not driving them. We should take note that cars are driven only 8% of the time on average.
Businesses in this kind of industry screen both owners and renters and offer a technical platform such as a website or a mobile app that connects both parties together to manage rental bookings and collect payment. Businesses such as these get 25% and 40% of the total earnings which then cover the renter insurance, operating expenses, and roadside assistance.
The internet, the adoption of location-based services, and also the spread of mobile technology have been a great help for these kinds of businesses. These have helped the growth of peer-to-peer car sharing. It is also important to note that today’s generation is less attracted to car ownership compared to previous generations.
How does insurance usually work for peer to peer car sharing?
Important key points:
- Of course, you need to purchase a car-sharing company’s auto insurance to be covered enough.
- Your personal auto insurance covers traditional rentals. However, it doesn’t cover peer to peer car sharing.
- Basic insurance plans given by other car-sharing companies have very low limits so it’s recommendable to spend more to get good plans to increase coverage.
- Renters will be charged a deductible usually ranging from $1,000 to $3,000 if they need to file a claim.
Peer-to-peer car sharing is like Airbnb for cars. This allows you to rent another person’s car usually when the owner wouldn’t be using the car much or to rent out your car when you don’t really need it.
One example is when you decide to fly overseas for a week. You could rent your car to someone when you’re gone. One more instance is when you don’t need to drive much so you don’t need to own a car. You could rent a vehicle for a few hours that’s just parked in a person’s driveway most of the day since he works from a home office.
Simple Business Model
The business model of peer-to-peer car sharing is simple. However, the industry is also with complications usually with insurance and regulations fronts. One example is that some car-sharing networks require that your personal auto policy would be the main source for paying claims even though most personal policies usually exclude renting or driving car-sharing vehicles from coverage.
Penny Gusner, a consumer analyst from carinsurance.com, explains about peer to peer car sharing and its most common questions. We hope her answers can help you.
Who are the key players in the peer-to-peer car-sharing lane?
General Motors is one of the most notable and iconic car makers. Avis-owned Zipcar has been around for a longer time too. However, they differ significantly from peer to peer. Avis has a lot of vehicles parked in residential areas available for short-term rental.
General Motors rolled out peer cars allowing owners in selected cities to list their own personal vehicles for rent through their own car-sharing platform called Maven. Car owners who have other car brands such as Chevrolet, Buick, GMC, and Cadillac in Chicago, Detroit, and Ann Arbor can already put their cars and trucks that are model 2015 or newer up for rent. This service is an expansion or extension of General Motors’ car-sharing platform, Maven, which rents out GM-owned cars. General Motors plans to expand its service more to other cities for the rest of the year.
Gig work legislation
Peer-to-peer car sharing can be efficient for idle cars and may be less expensive and easier to rent than traditional car rentals. However, just like ride-sharing services like Uber and Lyft, this is somewhat controversial.
Several car rental lobby and trade groups have been working together to push for legislation that would regulate peer-to-peer car-sharing providers the same way car rental companies are. They argue that they are like Uber and Lyft and that they are software companies, not taxi services. Most car-sharing networks also would like to state that they don’t own a fleet of rental cars so they shouldn’t be considered a car rental business. They are a technology company providing a software platform to allow car owners to a side hustle and earn extra money.
If I rent a car through a peer-to-peer car-sharing service, am I covered under my own insurance?
You will have to check your own auto insurance policy since terms differ greatly. However, many car insurance companies exclude coverage if you’re using a peer to peer vehicle. According to Gusner, the policy would simply state that all third-party rentals are excluded. It may not provide coverage for any motor vehicle that is operated, maintained, or used as part of a personal vehicle sharing program. They would also state that personal sharing programs or ride-sharing activities of any kind are not included under their liability, medical payments, physical damage coverages, and uninsured motorist coverage. You should take note of these and always carefully read your policy. It is important to be aware since traditional car rentals are generally covered under a personal policy.
A lot of auto insurance companies have had this kind of language included in their policies for the last several years. If you are unsure if there is indeed coverage, we recommend you to contact and discuss it for clarification. This is important to know before renting since some car-sharing networks operate knowing that a renter’s policy would eventually pay some of the costs involved in the case of the renter damaging the car they booked.
If I rent out my car through a peer-to-peer car-sharing program, does my insurance cover the car?
Not really unless you have a commercial rather than a personal auto insurance policy. Personal policies now exclude peer car-sharing networks.
More information on what’s covered and what’s not by your auto insurance
Most car-sharing services usually provide free commercial auto insurance coverage for owners, renters, and third parties. However, terms and policies will differ depending on each company. State-specific limits and statutes are other factors that will define what kind of coverage each company will offer. The kind of coverage that usually gets included through the coverage of peer to peer car sharing services are the following:
Liability up to a million-dollar one limit per occurrence
This is usually the primary coverage for the car owner that will take effect during the time the owner is delivering the vehicle to the renter and ending when the car is already delivered. However, this is not in effect once the owner already retrieved the car or he’s already on the way to get the mobile. For the renter, the coverage is usually secondary to both the renter’s personal auto policy and any additional coverage they may have including coverage they received from a credit card. This means that an accident or injury claim is paid out by the peer to peer car sharing service only after the renter’s personal or supplemental policy already maxed out or denied coverage.
Uninsured/underinsured motorist coverage for the renter
This is usually not exceeding the statutory minimum limit allowable by state law which can mean zero coverage or none at all depending on the state.
Personal injury protection for the renter
This is usually not in excess of the statutory lowest limit allowable by state law.
Comprehensive and collision up to certain limits
Generally speaking, owners are protected against theft, fire, vandalism, and property damage to their cars and will be compensated up to the actual cash value of the car. However, this kind of protection can’t include any damage that will happen while the car is being delivered to the renter, everyday “wear and tear”, pre-existing damage, and personal belongings left in the car. Renters can usually choose to either decline coverage in case the car is damaged/destroyed, lost, or stolen while relying on their personal policy. They may also opt for a supplemental or additional insurance package that is offered by the peer-to-peer car-sharing service. When they choose this, they will be protected minus a medium to a high deductible that they have to pay first.
Some differences between a driver’s Personal Insurance Policy and a Commercial Policy:
Kindly keep in mind that personal auto policies typically don’t cover claims for accidents that happen while an owner’s car is being driven for other purposes such as commercial use. This is one of the reasons why peer-to-peer car-sharing services usually offer additional liability coverage. This is in order to pay for the claims that your personal policies don’t want to pay.
A lot of people think that this commercial coverage given by peer-to-peer car-sharing companies is already enough. However, some experts warn that different offers from some companies may not be sufficient for complete protection, especially for car owners.
Experts advise car owners to also purchase their own commercial auto insurance policy that provides enough property damage, bodily injury liability, coverage for no-fault and personal injury, collision, uninsured motorist, and complete and comprehensive physical damage. However, please keep in mind that insurance coverage can be expensive and can cost up to a thousand dollars extra per year.
One more risk to take a look at is if the expenses concerning an accident claim exceed the limit set by your insurance personal policy or peer to peer car sharing service coverage limit including all the expensive medical expenses or also a lawsuit leading to a death or serious injury. You could be charged with all of these costs.
Always keep in mind that auto insurance laws and requirements differ for each state. These all depend, however, on each different state whether the owner or possible renter’s personal insurance or the peer to peer car sharing services insurance is the main focus or the secondary focus.
In addition, be aware that California, Washington, and Oregon have passed laws that prohibit a personal auto insurance policy from being revoked or nonrenewable specifically for the reason that the owner participates in a peer-to-peer car-sharing program. However, also keep in mind that these laws do not require the owners’ personal auto insurance policies to also take the claims.
Moreso, the personal policy cannot include any and all coverage and also the comprehensive and collision insurance for accidents that happen while your car is being rented out. Also, some insurance companies in some states may also not include, cancel or not renew personal auto policy coverage or could even increase premium rates when you decide to rent out your vehicle to another driver using a peer-to-peer car-sharing service.
Are more insurance companies offering riders to accommodate peer to peer car sharing just like for ride-sharing like Uber or Lyft?
According to Gusner, no. However, it is an industry where we can see further growth soon since auto insurance companies have expanded their policies with specific ridesharing coverage since they found a market once Uber and Lyft operated.
Some insurance companies may just also recommend people renting out their vehicles to just get a standard commercial policy. For the owner, they actually don’t have other options if the personal policy doesn’t really cover the rental other than purchasing coverage from the company running the peer-to-peer car-sharing program.
How will liability, comprehensive, and collision work with company insurance plans?
Liability car insurance will cover the damage you caused to another car and will pay for the medical costs of the people who were injured in the accident. However, the liability will not cover the vehicle you are driving or pay for your own injuries. Collision coverage will instead pay for the damage to the car you’re driving regardless of whose fault it is. Comprehensive will cover vandalism and theft. It will also cover damages due to hail, flooding, and fire.
Do I get commercial insurance if I join in on providing P2P car-sharing services?
According to Gusner, she greatly recommends talking and consulting your car insurance company to be covered properly when you decide to participate in a peer-to-peer car-sharing program. Your insurer will tell you what your personal policy covers and if you need to upgrade to a commercial policy. It is important to be really sure so you don’t get into trouble or into a financial bind if you purchase coverage that you don’t need.
What risks should owners who participate in peer-to-peer car-sharing be aware of?
Gusner says that “Some of the risks would be, of course, your car being damaged and placing more mileage on your vehicle. These things can increase your insurance rates. In addition, if you don’t inform your insurance company that you’re renting out your car, your insurance policy might get canceled. You’ll have a hard time finding another company that will offer you a policy.
She added that if you don’t carry a commercial policy and if your personal policy doesn’t cover peer-to-peer car sharing, you then need to buy physical damage coverage; both comprehensive and collision from the ride-sharing company to have your vehicle paid by your insurance.
Another risk to take a look at and check is if you have a basic and simple plan from your insurance company. You’re only safeguarded for state minimum liability amounts which are low and can only be used in a non-serious accident.
What about peer to peer car sharing risks for renters?
Regarding peer-to-peer car sharing risks for renters, one of the risks is that they don’t have insurance for the car so they need to purchase the guest insurance. If not, one of the consequences is they will be personally financially responsible if they destroy the car while using it.
Gusner adds that even though there is coverage in place if you destroy a car, you still have to pay out of your pockets. After you file a claim and depending on which coverage plan you selected, you will initially pay a fee of $500 to $3,000 depending on the first damage assessment which may or may not is refunded in the end.
This will depend on your situation. You will also have to pay a claim handling fee of up to $575. So, in the end, you will have to pay around $1,075 to $3,575 to file a claim. You will have to wait to be reimbursed which will depend on the amount of damage. Depending on who is at fault and other factors, you could receive a partial or a full refund or even get nothing at all.
Before signing up for car sharing
Before you participate in peer-to-peer car sharing, we recommend reading the fine print carefully on any kind of coverage provided for you and also examining the fees charged by the peer-to-peer car-sharing service. We suggest checking the website of the company and closely reading the kind of insurance protection they offer. Don’t also hesitate to ask questions about anything.
You should also inform your personal auto insurance company that you would like to participate in peer-to-peer car sharing and ensure that it won’t be a problem for both parties. Ask your insurance agent what minimum coverage limits and supplemental coverage they would like to recommend to you. Make sure that you’re not paying too much or duplicating coverage unnecessarily.
According to studies, possible renters should make sure that they have liability coverage that could provide them $100,000 bodily injury, $300,000 per accident, and $100,000 property damage. We greatly suggest increasing your personal uninsured or underinsured motorist coverage limits. Also, purchase non-owner liability insurance too if you don’t really own a vehicle. Furthermore, call your credit card company to ask if they offer free supplemental auto insurance coverage and up to what extent if your card will be used for the peer-to-peer car-sharing service.
More things should also be considered regarding this service. Possible owners should not only specifically reply to liability coverage offered by their own auto insurance policy. We greatly recommend purchasing additional comprehensive / collision and commercial insurance coverage for triple protection. Ensure that your peer-to-peer car-sharing service has a system already uploaded for completely checking your possible renters for accidents and probable violations.
Ask us any queries that you may have in mind
We hope this article about peer-to-peer car sharing helped you and made you understand the process. Peer-to-peer car sharing is a very good side hustle so you could earn extra while you are not using your own car. If you have any questions tingling in your mind, we hope to help you out. Please do not hesitate to contact us. Please send us an email or call us. We will gladly answer your questions! For more articles about auto insurance, check our website for more details!