Auto Insurance and Sharing Your Car
The millennials have ushered in an era of sharing. They share homes, businesses, information, office spaces, and transportation. However, when it comes to sharing your car, someone’s name is on the ownership papers, and that someone needs to check their auto insurance before lending the car to a friend, co-worker, neighbor, or stranger.
If you’re looking to make money off of sharing your car, you’re going to be handing over the keys to total strangers. It’s different than lending your car to your sibling or a friend. Although, that could be risky, too – more on that later. Peer-to-peer (P2P) car-sharing services are becoming increasingly popular, but personal auto insurance has a hard time keeping up with this trend. For one, your personal auto insurance may not be set up to protect you since you are using your car as a business, making money off of lending it out to peers. It’s the same way that your home insurance won’t cover your home office should something occur.
If you’re making money off of sharing your car, you need to get extra collision and liability coverage, and more comprehensive auto insurance to protect your new business.
Lending your car to a friend or family member
It is a general myth that the insurance follows the driver when, in fact, it follows the vehicle (DMV). For a family car, everyone living in your household who is of legal driving age will typically be covered by your auto insurance. However, if you lend your car to a friend or neighbor, you need to understand who is liable in the event of an accident. Most likely, the owner of the vehicle will be responsible for filing a claim and paying damages, even though you weren’t driving the car at the time. As long as you have given the driver permission to drive your car, your auto insurance is the primary insurance in the event of an accident.
However, what if the driver has their own insurance? The insurance responsible for paying damages (provided the accident was the fault of the person driving your car) is the primary auto insurance – yours, and not the insurance of the person borrowing your car. Their insurance is secondary and their provider may say that it is your insurance that should pay, even if the driver tried to take responsibility for the accident. Only in the event that the damages exceed your limits will the driver’s insurance kick in to cover the rest.
Talk to an independent agent about your auto insurance policy
AAI Central is an independent insurance agency located in Thornton, Colorado. Before you lend your car to a stranger or a friend, talk to an insurance agent about your coverage and liability in the event of an accident.