Do I Need Special Insurance for Ridesharing?
For many years, drivers have carpooled in order to save on gas and wear and tear on vehicles. According to the 2000 U. S. Census, 15.6 million commuters or 12 percent of all work drivers carpooled to save money.
Simple carpooling is usually covered by auto insurance, even if someone else is driving your car. However, when you begin to take carpooling a step further and engage in peer-to-peer car sharing programs, also known as “ridesharing,” insurance problems may develop.
What Is Ridesharing?
Ridesharing is a grassroots program that has sprung up over the past ten years in several major cities. It allows drivers to share the cost of a vehicle and to spread that cost over a larger number of people. It works well for those who do not want the complete expense of maintaining a private vehicle but need occasional limited access to private transportation.
According to a study by the University of California, Berkeley, about 27 ridesharing programs exist throughout the country and more than half a million drivers participate in these programs. Peer-to-peer sharing has become extremely popular for young people and college students who only need a car occasionally. They can “rent” the vehicle by the hour then return it to where they got it and walk away with no further worry about maintenance or other costs.
However, those who drive still need proof of liability insurance in the event of an accident. Ridesharers must comply with state laws regarding liability coverage just as if they owned a vehicle themselves.
How Do I Know What Kind of Insurance I Need for Ridesharing?
Ridesharing programs are of two types: for-profit and non-profit. For-profit programs offer shared rides for an hourly rate; non-profits may feature carpooling and other options not available with for-profit companies. Non-profits may also allow you as a car owner to share your vehicle with other drivers in return for help paying for gas, maintenance and other costs.
For the most part, carpooling is covered under your liability insurance no matter who is driving your car. This is due to the “permissible driver” doctrine that states that the insurance company must cover the vehicle and not the individual driver per se. Most states enforce this doctrine and expect car insurance companies to pay no matter who is driving a vehicle.
However, there are exceptions for “livery” vehicles. This means that if you rent your car to someone, you are no longer covered under the permissible driver doctrine. Now, you must have a livery license and special auto insurance to cover this driver.
How does this affect a peer-to-peer sharing program? Arguably, if you are renting time in a car along with other drivers, your insurance may not cover you. Furthermore, if you have a vehicle you sublet under a peer-to-peer sharing program, your auto insurance may have some serious questions if someone else is driving your vehicle and causes and accident.
Simply put, allowing just anyone to drive your car under a peer-to-peer ridesharing program can be risky. If that person does not have adequate insurance coverage you might find yourself stuck with a large bill if he or she causes an accident.
While the question of ridesharing is a relatively murky one, one thing is very clear: your car insurance rates are based on personal use and not commercial use. In fact, if your car is wrecked by someone else while it is being “rented,” chances are your personal insurance will not cover the damage.
What Can I Do To Insure My Car During Ridesharing?
The first and most important step is to make your insurance company aware that you are considering ridesharing and ask for clarification on the insurance company’s policy. You may be able to purchase a simple rider that will cover you in all ridesharing circumstances.
You can also discuss the insurance situation with the ridesharing program. Some states require non-profit and for-profit rideshare programs to provide liability insurance in case someone’s insurance company does not pay or a designated driver does not have coverage.
Be aware, however, that the rideshare’s insurance may not pay all of your damages. For example, if someone else causes an accident in your car, the rideshare’s insurance may pay the liability costs. However, the company may not pay for the residual depreciation on your car, and that may cost you money in the long run.
Another option is to increase your current coverage. Your uninsured motorist coverage may cover you for liability under ridesharing; you can also purchase an umbrella policy.