Is Working in the ‘Sharing Economy’ for You?
You’ve probably heard of the “sharing economy” or, at least, some of the companies driving it. Uber, Lyft and Sidecar allow people to utilize their own vehicles to provide a ride service similar to taxis. Homeowners rent out their properties to vacationers via companies such as Airbnb and VRBO. And, the concept continues to grow and gain acceptance, as many people enjoy the convenience and (in some instances) cost savings of these new ride and rental options.
Using these services is one thing — but what about providing them? Is this something worth considering? We can’t answer that question for you, of course. But we can help explain a few of the benefits and risks involved.
Ride-Sharing Services: Providing Transportation for Others in Your Car
In cities across the country, companies such as Uber and Lyft have turned the taxi industry upside down. They offer attractive options for riders. But, what advantages do ride-sharing services offer the driver?
- Flexibility: Drivers can choose which fares to accept, and work as much or as little as they like.
- Accountability: Services allow drivers to rate riders and report abusive behavior. In addition, customers typically have to create an account with personal information to request a ride. So, unlike a taxi, theoretically, each ride can be traced to a specific customer.
- Extra Income: While some drivers work full-time, others drive around their regular work or school schedules to earn extra money. Or drive for extra income during retirement.
Even with these benefits, however, there are potential drawbacks to driving for one of these ride sharing services. Any of these could apply to you:
- Risk: The worker in the sharing economy, rather than the company, takes on much of the risk. Income can be irregular, and drivers may have limited or no access to programs and benefits, such as workers compensation. And, while services typically have liability insurance for when you are transporting a passenger, your personal auto policy might not cover you, for example, if you get in a crash after dropping the passenger off.
- Legal Considerations: Aside from the insurance issue mentioned above, there are other concerns as well. For example, in some areas, the very legality of the services is in question, and cities have actually cited drivers for operating an illegal taxi service.
- Fees: Each service takes a cut of what the customer pays for the ride.
We’d mention the wear and tear on your car, too, but that sounds pretty minor compared to everything else.
Home-Sharing Services: Renting out a Room or Your Home
Many of the same attractions as driving for a car service apply when it comes to allowing strangers to stay in your home.
- Flexibility: Depending on the service you use to list your property, you have control over which visitors you allow — and when you’ll allow them.
- Extra Income: People who own vacation properties often rent them out, but even those with just an extra room frequently can find takers.
- Social Interaction: Renting out a room in your home can offer you the chance to meet many different types of people, learn about different cultures, etc. And, if you make a connection, it can result in repeat business and long-lasting friendships.
However, there are some severe potential downsides to sharing your home:
- Financial Risk: Most homeowners policies and renters policies do not cover significant commercial activity, which could put you on the hook if your guests cause damage, steal something, sustain an injury or participate in illegal acts. And, even if the sharing service provides insurance, it likely is “secondary” coverage, meaning it will look to your personal insurance policy for coverage first.
- Safety: No matter how nice your renters may seem, there’s no way around it — they are strangers in your home. And, that carries a safety risk.
- Fees: Part of what the customer pays goes to the listing company.
The sharing economy is exciting, but it poses unique challenges as well. So, before you jump in (on either side!), do some research and determine what level of risk you’re willing to accept.
Check Your Insurance Coverage
If you’re considering a job in the sharing economy, be sure to chat with your IPA agent. Your agent should be able to help you understand the potential risks from an insurance perspective.