Ride sharing is a booming business in the United States, and people are looking to cash in on its success. Thanks to the widespread availability of smart phones and other mobile devices, ordinary persons are now able to connect with potential passengers and provide rides using their private vehicles. However, if you are thinking of using your car as a way to earn income, then you should be prepared by understanding the concerns and potential pitfalls from an auto insurance point-of-view. Below are a few considerations to keep in mind before you sign-up:
Confusion over insurance coverage and how to gain clarity
By turning non-professional drivers into part-time chauffeurs, ride sharing has blurred the lines between commercial and personal car insurance policies. This has introduced a lot of confusion into the insurance industry as well as regulatory authorities. At the policy holder level, this can create a tricky situation for would-be ride sharing drivers. For example, many policies specifically spell-out that drivers cannot use their cars to transport paying passengers and still remain covered should an accident occur.
However, some ride sharing companies, also known as Transportation Network Companies (TNC), have carefully worded their policies so that their drivers are technically providing carpooling services. Carpooling is often considered to be an acceptable, covered activity under the provisions of personal auto insurance, but this is far from a universal standard.
Typically, TNCs provide some level of commercial insurance coverage for their drivers. However, while this commercial coverage may protect riders and other drivers from loss in the event of an accident, it may do nothing to cover you and your expenses. With this in mind, and with the current lack of clarity regarding how personal coverage affects drivers, there is a lot of potential for you to suffer a large financial loss.
That's why it is vital for you to contact your insurance company and request that they provide clear boundaries regarding your planned activities. You need to know in advance how your personal policy will be affected. Also, be sure that you understand what the TNC does upon your behalf in the way of specific commercial coverage.
Here are several key questions you should ask your insurance company and prospective TNC:
If a driver has an accident while carrying a rider, does the commercial policy provided by the TNC or the driver's personal policy take precedence?
Is there a deductible that must be paid by the driver before commercial coverage applies?
Is there a need to purchase additional coverage to protect the driver in the event of a particularly costly accident?
Will personal insurance rates increase as a result of being a ride sharing driver?
Will a driver's personal auto policy be canceled by the insurance company if the driver takes part in the TNC?
Does the driver have any commercial coverage from the TNC while waiting to pick-up a passenger, or does commercial coverage only apply when a passenger is in the vehicle?
Insurance companies are meeting the challenge
The good news is that as ride-sharing continues to grow as a business opportunity for everyday Americans, the insurance industry, as well as government regulators, can be expected to provide much-needed clarification. In fact, this is already occurring; for example, the California state government has addressed the issue with comprehensive regulations that will be applied to both TNCs and the drivers that provide ride sharing.
Insurance companies are also stepping up by offering TNC policies for insured drivers. These policies are designed to specifically apply for drivers who are partnered with a TNC, and they also are closing some of the gaps that cause confusion for everyone involved. While this is a new trend, you can expect this practice to become much more widespread within the industry.
For more information, contact a local insurance company, like Colling Insurance Services, Inc.