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Do your car insurance clients understand this risk?

Do your car insurance clients understand this risk?

Do your car insurance clients understand this risk? There is a new, hot money-making opportunity sweeping the UK – but it is one that could also prove a false economy unless you ensure that your clients are well prepared for its insurance implications.

“I currently hire out two cars, but I would definitely consider buying more cars just to hire out within the community, sometimes it’s hard to keep up with the demand.”

Those are the words of Senthuran Gengatharan, who uses the HiyaCar platform for two of his cars – allowing him to make a profit while they are unused. By doing so, he manages to save money for unexpected expenses and costs.

The idea of hiring out a car in this manner is a natural follow-on to the success of sharing homes through websites such as Airbnb. Recent data has shown that renting out a car that is typically left unused can earn someone up to £2,000 a month and, with HiyaCar, the platform that allows you to rent cars from people in your community, the average car owner can make £116 per week, which over the course of a year can equate to £5,980. If you have a good model of car, this can potentially be even higher.

“It really does vary how much money I make in a week when hiring out my car, some weeks are quieter than the others,” continued Gengatharan. “During peak periods such as Christmas or the summer holidays you can expect the car to be hired out pretty much every day. I’d say on average it’s about £150 a week per car.

“This extra bit of income has helped me save for a holiday and also keeps some extra money in the bank for any unexpected expenses.”

However, there are dangers too – especially if car owners fall into the trap of thinking “this is just a bit of extra cash” and don’t actually think of it as a business, particularly in relation to insurance.

According to the Association of British Insurers,  “all ABI motor insurers have agreed that your insurance cover will not be affected if your passengers contribute towards your journey costs (including fuel, vehicle depreciation and associated vehicle running costs), as long as lifts are given in a vehicle seating eight passengers or less. This does not apply if you make a profit from payments received or if carrying passengers is your business.”

In this instance, of course, actually hiring out your car for use goes beyond traditional car sharing – and firmly becomes a profit-making business.

Gocompare.com car insurance’s spokesman, Matt Oliver, commented: “If you’re thinking of using your car to make money through Uber or other ride-sharing apps, you will not be covered by private car insurance. As you will be effectively running a business, you’ll need commercial private hire vehicle insurance offering cover for hire or reward.”

Recently, ride service provider Uber took Transport for London to court over tougher rules requiring drivers to have commercial insurance policies even if they are using their cars for private purposes. It lost its legal fight.

Indeed there are implications to lending out a car even without money involved. Lending a car to a family member or friend, for example, who is not included as a named driver on an insurance policy, could see the policyholder stung with a fine and penalty points for permitting a vehicle to being on the road without insurance.

So the emphasis is on insurance brokers and other professionals to ensure their clients are fully informed of the insurance implications of using their car for hire. There is money to be made from hiring out a car, but this can quickly be lost should a claim be necessitated with an unsuitable insurance policy in place.

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Uber loses legal fight over Transport for London insurance rules