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Peer-to-Peer Car Sharing

Car pooling has been popular for decades.  Particularly when commuting in urban areas, and with rising prices in gas, car pooling is an affordable way to travel, while being more environmentally friendly at the same time.  The idea of car pooling has naturally evolved to include newer trends such as peer-to-peer car sharing.

Car sharing increases in popularity.

What is Peer Car Sharing?

Studies show that most people leave their cars idle for the bulk of each day – perhaps up to as many as 22 hours in each day.  With cars sitting for that much time, some have taken to renting out their cars to others by the hour.  Typically, you pay an hourly or daily rate and, through the use of keyless entry, can borrow the car from the owner.  Using GPS systems, they can track mileage and location for pricing purposes. While this has become increasingly popular, the one drawback has been insurance.

Insurance and Peer Car Sharing

In most cases, the driver’s own insurance will cover them. Most insurance companies are not liable for what happens when the driver is not using the car.  However, in most states insurance companies may also cancel or refuse to renew coverage to drivers who rent out their cars to others.  This poses a pretty enormous risk for car sharers.

Usage Based

Historically, insurance companies have been very resistant to these types of endeavors, which fall along the lines of “usage based” rental.  Though the public is increasingly demanding such measures, insurers have been slow to comply.  The increased risk for the insurer has not been something that they’ve been willing to shoulder.  But as trends continue, and state governments become interested in fostering those trends, will the reluctance to insure peer-to-peer program participants continue to be the case?

State Actions

With states like California and Oregon already passing laws that protect peer-to-peer car sharing programs, and Washington looking to follow soon, insurers are getting more and more pressure not only to provide for these types of programs, but to offer mileage-based insurance programs in general.  In Oregon, you can’t earn more annually than your car costs to operate (that would require commercial rental agreements) but you can deduct the standard IRS tax rate and in effect, get hidden tax breaks through peer-to-peer rental programs.   Other states have similar laws in various stages of legislation.

Understand the Issues

This may be good news for peer-to-peer car sharing.  With insurance companies slowly becoming more willing to play ball, and state governments protecting the rights of peer-to-peer car sharers, it seems as though these types of programs will escalate in popularity.  But, if you’re looking into either sharing your car, here are a few things that you should be aware of:

  • Greater Risk – car sharing exposes your car to greater risk from traffic, weather conditions, and drivers who may not be familiar with operating your car.  These things increase the likelihood that your car may sustain damage, and therefore can increase your insurance rates.
  • Liability – if you don’t maintain your car well and an accident occurs that is caused by poor maintenance or condition of the car, you may be held liable rather than the person who was actually driving at the time.
  • Depreciation – not only the value of the car as it gets more use, but if there is an accident that the driver takes care of, you may suffer the insurance depreciation anyway.

The bottom line is that this trend will continue to grow in popularity, and while you should be aware of the risks, it’s a pretty safe bet that the rewards will outweigh the potential liabilities, making peer-to-peer car sharing an increasingly lucrative way to put your car to good use. Be sure to check with your insurance agent before you begin peer-to-peer car sharing, or shop for the right auto insurance policy to support that endeavor.


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