Car Insurance Risks of Ride SharingPosted on Aug 30, 2015
The rising popularity of car and ride sharing is easy to understand. These days, many people hope to balance their need for transportation against concerns over the environment or a need to stretch their budget. However, people who participate in ride sharing may experience some issues with their car insurance.
What is car or ride sharing?
Traditional ride sharing may simply mean carpooling. In most cases, auto insurance should cover drivers of carpools as long as they aren’t getting paid for their services. It’s fine to offer to take turns driving to work or transporting kids to soccer games. Also, personal car policies usually cover loaning cars to a friend. However, a couple of new ways to share cars or rides may not be covered by typical insurance policies because car owners are either getting paid for the use of their car or their driving services.
Does Auto Insurance Cover P2P Ride Sharing?
Peer-to-peer (P2P) ride sharing and car sharing have become very popular recently. With ride sharing, drivers charge to pick up people in their personal cars. With car sharing, vehicle owners lend out their cars for compensation. Money gets exchanged for these services. This makes them very different than simply loaning out a car or offering to give a friend or coworker a ride. The exchange of money makes them commercial services. Any commercial or business use of a car is probably excluded under typical car insurance policies.
In short, it is important to keep these things in mind:
- If you rent, rather than loan out your car, your regular policy probably doesn’t cover it.
- If you get paid to drive your car, your regular policy probably excludes this service.
Understand Your Exposure When Ride or Car Sharing
First, drivers and vehicle owners need to understand the difference between typical types of coverage that are included in an auto insurance policy. This is usually a source of confusion when consumers conduct any type of rental transactions with vehicles.
- Liability insurance covers other parties in an accident.
- Collision covers damage to the owner’s vehicle for losses from an accident.
- Comprehensive coverage covers damage to the owner’s vehicles from non-accident hazards.
- State laws require liability, and auto financing companies also require collision and comprehensive.
Any of these risks could also occur during a car or ride sharing transaction. You certainly don’t want to begin offering your car or driving services for pay, have an accident, and then find out you weren’t covered because your personal car insurance excluded this use of your vehicle. You could find end up liable for thousands of dollars. You could even find yourself in trouble with your state’s transportation department or your auto loan company.
How to Properly Cover Ride Sharing
The right thing to do is to speak with an insurance agent before you consider entering into one of these transactions. Very often, the right coverage can be added to a typical policy. In some cases, the P2P company may carry insurance that they extend to participants in their service. You should still check this coverage out with your own agent. It might only cover some of the risks that you could face.
This is not meant to discourage people from using these popular P2P transportation services. However, it is very important to make sure that both cars and drivers are adequately covered. The time to find out how your vehicle is covered is, of course, before there is an accident and not afterwards.