How Smart is it to Rent Out Your Car?

If you rent out your car for a little extra money, you may find yourself with financial headache.

Think twice before choosing to rent out your car for a profit.

Allowing a perfect stranger to rent out your car is the newest business idea that has hit the streets, quite literally. The basic premise is that you contact one of the renting companies (RelayRides, JustShareIt, etc.) to let them know that you are interested in renting out your car. You can rent it out for an hour up to a couple days, depending on how long you are willing to part with your vehicle. The company you are working with then pairs you up with a screened party who is interested in renting your car.

While this may seem like a good idea, this is not like getting your car wrapped and becoming a moving advertisement. This is letting someone you don’t know, drive something that is a large asset of yours.

You should not only be wary about doing this, but you need to check with your insurance company before you do.

Rent Out Your Car = Unhappy Insurance Company

Renting out your car to another party could put you in jeopardy with your insurance company.

First, you are allowing people who are not on your insurance policy to drive the vehicle. Insurance coverage follows the vehicle and your insurance is liable for whatever damage is done by your vehicle; regardless, of who is driving it at the time.

Two, by renting out your car you are engaging in a commercial pursuit. Any vehicle used for commercial activities cannot be covered under a personal insurance policy, giving your insurance company grounds to cancel your policy. If you have lienholder or leaseholder on your vehicle and you lose your insurance, you are subject to having forced place insurance put on your vehicle. Forced placed insurance is considerably more expensive than your regular insurance.

Potential Problem of Choosing to Rent out Your Car

Even with the high limits of liability that the renting agencies have out for your vehicle, your insurance company, and you can still be on the hook in the event of an accident. In the case of a bad accident, if the medical bills and lawsuit awards exceed the amount of the policy, your insurance company is next in line. I know this doesn’t seem right and that the driver should be the next in line to pay the damages. Remember though, the insurance coverage follows the vehicle, not the driver.

The next piece of bad news is that your insurance company could get out of having to pay. Because renting out your vehicle is a commercial activity, it is excluded for coverage under most personal auto policies. Meaning that you will end up responsible for an accident you are only connected to because you chose to rent out your car.

To be continued…….