Does Ridesharing Increase Insurance?

When a personal vehicle is used for ridesharing, its insurance needs change. This transforms a car from a personal conveyance into a commercial tool, altering the risk profile for insurance providers. Engaging in ridesharing necessitates an adjustment to one’s insurance coverage, often leading to increased premiums to cover these new risks. This shift in vehicle usage moves beyond a standard personal auto policy, requiring specialized protection.

Personal and Commercial Auto Insurance Differences

A standard personal auto insurance policy is primarily designed to cover a vehicle used for private, non-business purposes, such as commuting, errands, or leisure travel. These policies contain specific exclusions for commercial activities, meaning they will not provide coverage if the vehicle is being used to generate income, particularly for transporting people or goods for a fee. This “business use exclusion” can lead to denied claims if an accident occurs while engaged in such activities.

In contrast, commercial auto insurance is tailored for vehicles used for business operations. This includes cars, trucks, or vans that transport goods, employees, or clients, or perform a paid service. Commercial policies address the higher risks of business driving, often providing higher liability limits compared to personal policies to protect against financial exposure in an accident. They may also cover multiple drivers and a wider array of vehicle types.

Ridesharing falls into commercial use because drivers receive compensation for transporting passengers. Increased time on the road, often during peak hours, and carrying passengers elevate the risk of an accident. Therefore, a personal auto policy is insufficient for ridesharing, as it lacks the necessary provisions and higher limits for commercial exposures.

Rideshare Company Insurance Provisions

Rideshare companies, also known as Transportation Network Companies (TNCs), provide commercial insurance coverage for their drivers. This coverage is contingent and varies depending on the driver’s status within a “three-period system.” When the rideshare application is off, the driver’s personal auto insurance policy is the sole source of coverage.

The first period begins when the driver has the rideshare app on and is available to accept requests but has not yet accepted one. During this “waiting phase,” personal insurance does not apply due to commercial intent, and the TNC’s coverage is limited. Liability coverage for third parties might be limited to $50,000 per person for bodily injury, $100,000 per accident for bodily injury, and $25,000 for property damage. Coverage for damage to the driver’s own vehicle is often non-existent. This creates a “coverage gap” where drivers are exposed to financial risk.

Once a driver accepts a ride request and is en route to pick up a passenger (Period 2) or while the passenger is in the vehicle (Period 3), the TNC’s commercial insurance becomes primary. It offers much higher liability coverage, often up to $1 million, designed to protect both the driver and passengers. However, physical damage coverage for the driver’s own vehicle is often contingent on the driver having comprehensive and collision coverage on their personal policy, and it comes with a high deductible, such as $2,500.

Purchasing Rideshare Endorsements or Policies

To address insurance gaps and ensure adequate protection, rideshare drivers have options. One common solution is a “rideshare endorsement,” an add-on to a personal auto insurance policy. This endorsement extends personal policy coverage to include periods when the driver is logged into the rideshare app but has not yet accepted a ride (the “waiting phase”). It bridges the gap between personal insurance and the limited coverage provided by the rideshare company.

Adding a rideshare endorsement notifies the personal insurance provider of commercial activity, which can prevent policy cancellation if the insurer discovers the vehicle is used for ridesharing. These endorsements provide coverage for liability, comprehensive, and collision during the gap period, mirroring the limits of the driver’s personal policy. The cost of a rideshare endorsement is modest, with an average annual increase of around $94.

Alternatively, some insurance carriers offer standalone “rideshare insurance policies,” designed for the unique needs of rideshare drivers. These policies may offer more comprehensive coverage across all phases of ridesharing, providing primary coverage where TNC insurance is insufficient or has high deductibles. Drivers should contact their current insurance provider to inquire about available rideshare endorsements or policies and understand how they integrate with existing coverage and costs.

Claim Scenarios Without Proper Coverage

Driving for a rideshare service without appropriate insurance coverage can lead to financial consequences in an accident. A driver logged into the rideshare app and waiting for a request, involved in a collision, will find their personal auto insurance policy denies the claim due to the “business use exclusion.” This leaves the driver personally responsible for all damages. The limited liability coverage from the rideshare company during this phase may not cover property damage to the driver’s vehicle or their medical expenses.

If a driver is en route to pick up a passenger, or has a passenger in the vehicle, and an accident occurs, the rideshare company’s liability coverage (often $1 million) would apply for third-party injuries and property damage. However, the driver could still face out-of-pocket costs for their vehicle’s repairs due to high deductibles, around $2,500, associated with the rideshare company’s contingent comprehensive and collision coverage. Without an endorsement or separate rideshare policy, the driver would be solely responsible for this large deductible. Such financial burdens, including vehicle repair costs, medical bills, and potential legal fees, can be significant for a driver who lacks proper rideshare-specific insurance.