Ride-Sharing Insurance Issues

Mobile ride-sharing services, such as Uber, Lyft, and Sidecar, have grown quickly in U.S. cities over the last few years. A 2017 survey found that 30% of Americans in major markets had used such a service.¹ In New York City, more than 63,000 cars provide rides though five major ride-sharing apps, almost five times the number of city-licensed yellow-medallion cabs.²

Ride-sharing services can be a cost-effective and convenient transportation method for passengers as well as a way for drivers to earn extra income. However, this quickly growing transportation alternative carries liability issues that have not yet been fully addressed by the insurance industry.

Commercial vs. Personal

Ride-sharing businesses are officially Transportation Network Companies (TNCs) and require commercial insurance coverage. However, most drivers for TNCs use their own cars that are covered by a personal auto policy, which stops protecting the driver or vehicle the moment the driver logs into the ride-sharing service and does not pick up coverage again until he or she signs out.³

The coverage gap between personal auto policies and commercial policies is a concern for both drivers and passengers who use ride-sharing services.

Insurance Issues for Drivers

For insurance purposes, there are three periods of risk for a ride-sharing driver. Before you sign up as a driver, be sure you understand exactly what coverage the ride-sharing service offers for each of these periods.

Period 1: The application is on, and the driver is waiting for a ride request. This period typically involves the most significant coverage gap. Large companies may offer liability coverage with low limits, but they may not offer coverage for uninsured/underinsured motorists or damage to the driver's car. Any coverage may be secondary to your personal coverage, but standard personal coverage will generally not cover any period while you are signed into the ride-sharing app. You may be able to purchase a separate rider to your personal policy to cover this period.^4-5

Period 2: Ride request is accepted, but no passenger is in the vehicle.

Period 3: Passenger(s) in vehicle.

These periods are often considered together by state law and by ride-sharing insurance policies. Several larger TNCs offer a $1 million limit on primary liability coverage during these periods. They may also offer coverage for uninsured and underinsured motorists and collision insurance with a deductible for damage to the driver's vehicle. ^6-7

Be sure you understand the deductibles and limits of any coverage offered for these periods and whether the coverage is primary or secondary. (Primary coverage pays for covered events before other coverages, up to policy limits, whereas secondary coverage only becomes effective after primary coverage.)

Laws and insurance offerings are changing rapidly and vary by state. An insurance professional in your state may be able to help you obtain the latest and most pertinent information about the coverage you'll need.

Considerations for Passengers

Ride-sharing services may be convenient, but there are some important factors to consider before hopping into a stranger's car. Doing a little homework up front could help you have a safe and positive ride-sharing experience.

Safety. Research how your ride-sharing service screens its drivers. What types of background checks do they run before hiring a driver? Is it a one-and-done process, or are drivers screened regularly to account for changes to their criminal histories or driving records?

Payment. It may seem obvious, but you should pay close attention to how much a ride-sharing trip will cost you. Rates will vary depending on the service you use, the length of your trip, and how much demand there is for rides at the time. Fares are usually quoted on the service's mobile app, so you can access that information prior to booking the trip. In some cases, a ride-sharing service might be more cost-effective than using another mode of transportation, but holidays, rush hours, and special events can drive up prices dramatically.

Transactions typically occur through the app, so fares are charged automatically to your credit card. That can be a convenient way to pay, but there are risks associated with keeping your credit-card information on file. Other payment options may also be available.

Insurance. The insurance concerns described above for a driver could affect you if you are injured in an accident while you are a paying passenger. Consider looking into the specifics of the ride-sharing company's coverage, especially if you use a particular service frequently. You can also contact your state's insurance department to find out about insurance requirements for ride-sharing services and how they might affect you as a passenger.

Whether you are a ride-sharing driver or passenger, be sure to discuss any coverage concerns with your insurance representative.