IMO your first step is to talk with your home owners insurance agent. You need to determine how much liability is on you. Also, you need to make sure that the cost of your machine is also covered by your insurance. Most policies have a cap on the cost for replacing items. I have an additional rider on my policy to cover my machines.
When I was in the plans for opening a store, this is an issue I had to research because I was considering renting longarm and domestic machines at my business. Now my research is for the state of Missouri so you will want to research for your state. Also, some of my information is from an attorney.
Per the attorney; If a rentee does damage your machine don't even think you can get the rentee to pay for the repairs. That comes down to way too much they said/I said and most judges will rule in favor of the rentee because it is "implied" the owner is willing to cover the damages.
Per the insurance agent; If the rentee becomes injured while renting the machine, the owner is liable for any and all medical expenses incurred by that injury. I know you say it is your friends wanting to rent the machine BUT when it comes to an injury, experience is speaking here, friendship will quickly come to an end. Injuries can be: needle breaking and flying into an eye (yep this does happen), sewing thru a finger (done this twice myself), falling while running the machine (tripping over one's feet comes to mind), getting an electric shock from the machine (I've not had this happen but have heard of it happening), and this list can be forever endless. As my agent said to me, "Even if you think something will never happen is just the time it WILL happen." There are certain things you can do for protection of others but you really can't cover them all.
Then in addition to all of this, you can still have several problems; you have a quilt you need to get done as a gift and someone else is using the machine, someone is working on a quilt and you have an emergency come up, and once again this list can become endless.
IMO, if you really want to keep the friendships, DON'T RENT YOUR MACHINE. That is just a disaster looking for a place to happen.