With the advent of the self-driving car knocking at our door, car sharing may soon become a reality whether we want it or not. However, car sharing has far different implications when someone has to be behind the wheel. Car-sharing is perfect for people who need a car infrequently and for short periods of time. Renters pay only for what they use – determined by time of possession and distance travelled. Car-sharing allows some households to live car-free, or to reduce the numbers of cars they own.
There are two basic types of car-sharing services: Traditional car-sharing companies rent from a fleet of vehicles they own, and peer-to-peer car-sharing services facilitate transactions between two individuals. These companies manage reservations and payments, and also provide insurance.
Is P2P right for me?
Many car owners are jumping into the P2P arena. While a car costs a lot to buy, insure, fuel and maintain, most of the time it just sits there, slowly depreciating. So why not put it to use and defray some of those costs? According to P2P company RelayRides, an active owner can earn approximately $340 a month.
While car-sharing has its benefits, it also has its downsides. There are potential safety, financial and legal risks associated with renting a car to another individual. The issue of exactly who pays for what in the event of an accident remains a grey area. The driver of the car, the car sharing company, and the owner of the car could all potentially be targets of a liability lawsuit.
For some renters, face-to-face key swaps raise serious personal-safety red flags. The criminally minded have used these swaps as setups for robbery and assault. As a result, some companies are now outfitting cars with electronic locking devices that allow renters to unlock cars without a key where they’ll find a key tucked safely inside the vehicle.
One owner concern, not unfounded, is that a renter using a stolen identity will simply take off with their car. The P2P companies now do background and driving-record checks to ensure would-be renters are properly vetted, but these technologies aren’t perfect, and bad guys have slipped through the cracks.
Insurance: the elephant in the room
Then there’s the insurance issue. Robin Chase, the founder of the traditional car sharing company Zipcar had this to say. “It took me a year and a half to get the insurance just right. Hours and hours of sitting with insurers and many companies and their thoughts about risk and how this is totally innovative, they’d never thought of it before.”
Traditional car-sharing companies, because they own the vehicles they rent, handle insurance the way the large, longer-term rental car companies do. By bundling car insurance within their basic fees, they make it easy for a to hit the road running. For uninsured renters, they save them the time and trouble of having to do their own auto insurance quotes comparisons.
P2P insurance issues
Peer-to-peer services offer insurance as well, but it gets a little more complicated. Because personal insurance policies typically don’t cover a person who rents a vehicle for commercial purposes, P2P companies generally provide $1 million for liability coverage. Many owners are comfortable with that level of protection. Some car owners, however are concerned that a crash could involve multiple claimants suing not only for lost wages but also pain and suffering, and that $1 million isn’t enough. To hedge their bets, some owners purchase extra commercial liability insurance for themselves.
The prevalence of uninsured drivers on the road is a growing problem. Nearly 15 percent of all drivers don’t have even the minimum liability insurance required by law. While liability insurance protects the owner from harm caused by his car and its driver to an uninsured motorist, it does not cover injuries and property damage if an uninsured motorist causes harm to his vehicle or its occupants.
If an uninsured driver causes an accident, there will be no insurance company to pay for the damages. The peer-to-peer car-sharing companies often carry only the minimum uninsured motorist protection required by the state, which might be only $20,000 to $50,000. The owner of the car could be on the hook for any costs that exceed the coverage.
By: Vincent Stokes
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