Published: January 2016
Ride-sharing companies offer personal transport by connecting passengers with individual drivers, usually through a phone app, explains the Insurance Information Institute (III). The ride-sharing industry has evolved rapidly over the past few years. According to the National Association of Insurance Commissioners (NAIC), ride-sharing is now available in more than 100 U.S. cities.
If you drive for a ride-sharing company — sometimes referred to as a transportation network company by insurers — it's important to be aware that there may be insurance implications if you drive your own personal vehicle. This article explains how your personal auto insurance may apply to ride sharing.
Many drivers regularly share rides or carpool with friends or coworkers. That kind of personal ride-sharing is typically covered by personal auto insurance policies, says the NAIC.
But if you’re picking up and transporting passengers for a fee, things are likely to be different. The III calls it a “myth” that personal auto insurance will cover business use of your vehicle.
The NAIC explains that most personal auto insurance policies exclude coverage when you’re using your vehicle for business purposes, by accepting payment to transport people you don’t know. As a result, if you have an accident, your passengers are injured, or your vehicle is damaged while driving for a ride-sharing company, it’s likely your personal auto insurance won’t cover the damage.
Why do personal insurance policies contain these exclusions? The Council of State Governments explains it’s because the risks of being a ride-sharing driver can be very different than driving yourself, your friends or your family. For example, if you drive for a ride-sharing company, you may be driving more often. You may also be driving in different neighborhoods, late at night, or more frequently in bad weather. In short, your insurance company is more likely to consider you a higher risk if you drive your car for business purposes.
Many ride-sharing companies offer their own insurance policies, which may help protect you if you have an accident, or if your vehicle is damaged, says the NAIC. However, relying on ride-sharing insurance may have risks because of potential gaps in coverage. These risks may include:
Ride-sharing companies can have different policies and levels of coverage. This is important to remember if you drive for multiple ride-sharing companies.So, for example, ride-sharing companies may offer collision or comprehensive insurance in certain circumstances, but limits and deductibles may vary, according to the NAIC.
Different stages of the ride-sharing process can be covered differently. Coverage may change depending whether you are waiting to be hailed by a passenger, are on the way to pick up a passenger, or actually have a passenger in the car. At different stages, you may have less coverage, or even no coverage, from your ride-sharing company.
Ride-sharing coverage may be contingent. If your ride-sharing coverage is contingent, you must make a claim with your own auto insurer before trying to file a claim on the ride-sharing company's policy. If your own insurer denies the claim, you may then be able to file a claim on the ride-sharing company's contingent coverage. Ride-sharing companies may also offer different types of coverage at different stages of the ride-sharing process.
Finally, ride-sharing coverage may vary by state, with states like California establishing new rules about the insurance that ride-sharing companies must offer, according to the California Department of Insurance.
If you drive for a transportation network company, you might want to explore your insurance options to help make sure you and your vehicle are protected. An emerging option for drivers is to add ridesharing coverage to an existing personal auto policy. The NAIC reports that insurers are still developing this type of coverage, and it may not be available in all states. For details and availability, check with your agent.
If you’re driving for a ride-sharing company, or considering doing so, it’s important to understand that a personal auto insurance policy may not cover you if something goes wrong. While many ride-sharing companies offer their own coverage, there can be gaps. Business auto insurance or a ride-sharing endorsement to your personal policy may be available to help protect you while driving.