It was only a matter of time before the idea of sharing your home moved to automobiles, and with that came the need for companies like TURO, Karshare, and Hagerty. In recent years, these companies have rethought their business models to include car sharing and the ability for participants to monetize their assets.
Car sharing allows participants to take their personal vehicles and offer them on a platform for other people to rent for daily, weekly, or extended use. These types of platforms are popular with people who have multiple vehicles, those looking to make a little extra money, or people working from home who want to make use of vehicles just sitting in their garage.
Regardless of why people decide to participate in car sharing, there are risks that the owner of the vehicle should be aware of when agreeing to participate in car-sharing platforms. First and foremost, it is crucial to understand that your personal car insurance does not include coverage while your vehicle is part of the program.
Insurance companies view participation in car sharing as a business activity because it generates money. It is important to note the difference between ride-share, which are companies like Uber or Lyft, and car-sharing. With ride-share, some insurance companies can extend to cover the money-generating activity on a personal auto policy that is enhanced with a ride-share endorsement. However, at this point, there is no such endorsement in the market on the personal auto policy that would cover the exposure of renting a personal vehicle to another driver for a profit. Car-share participants should consider adding a commercial policy that can cover this exposure, even if a policy is provided by a third party (such as the car-sharing platform).
Questions to consider.
Before renting your vehicle on a car-sharing platform, here are a few things to consider and questions to ask the platform about their commercial insurance policy:
What are the liability limits?
It’s important to understand what coverage is provided in the commercial policy and what liability limits you need to consider. Be sure to read the fine print to ensure you don’t overlook these important numbers.
Can you be sued personally if damages exceed the limits listed?
If the answer is yes, understand the personal exposure you have by listing your vehicle in this program.
What happens if your vehicle gets damaged while a renter is driving?
Understand your coverage and next steps if your car is damaged. Ask follow-up questions, including whether a loaner car will be provided while your car undergoes repairs.
How does diminishing value impact your vehicle if it is involved in an accident?
If damaged, the market value of your vehicle will not be the same as it was before the accident. Confirm if the insurance company will offer compensation for this loss in value.
If your car is in an accident, do you receive the actual cash value (ACV) for your vehicle or replacement cost?
ACV is the common way insurance companies cover vehicles at the time of total loss which considers depreciation. This means you may not be able to buy the same vehicle to replace the one that was lost because the amount you are given is less than the cost of a new one. A replacement cost or agreed value endorsement is recommended to ensure you receive adequate coverage to purchase a similar vehicle to yours should there be a total loss.
Is there a maximum value the insurance company will pay out on a vehicle in the event of a total loss?
If you have a luxury vehicle, your car may be worth more than the company will pay. Regardless of the valuation method (ACV or replacement cost), the insurance company may not pay the full value based on caps within the policy.
Know your facts before you begin
Every car-sharing company is different, and the protection they offer the vehicle owner varies. Above all, do your own research and understand fully your liability before signing up to share your vehicle. Understanding the risk and being prepared for the outcome will make this venture both pleasurable and hopefully profitable. Safe sharing!
Have any other questions? Contact our team at AiK2 to talk more with our Risk Consultants.
AiK2 PC is a boutique insurance broker that partners exclusively with financial advisors and family offices to better serve their clients’ P&C needs. We focus on risk consulting that gives clients the ability to live the life they want while protecting everything they’ve built, with the peace of mind that it is properly protected.
