How Does Car Insurance Work for Ride-Sharing Drivers?

A ride-sharing driver talks with his client in the back seat of his car.

(Image credit: Getty Images)

Remember taxis? Those cars out there, some of them a distinctive yellow with a black-checkered strip along each side, that pulled up when you yelled, “Hey, taxi!” You’d pop in, carefree as can be to have a stranger drive you where you want to go, and off the car went. Did you ever stop to think about whether the driver had insurance, or if they had tickets or accidents on their record? Heck, were you sure anyone had even checked to see if they had a driver’s license? I’ll answer for you: No. Not only did you not give it a second thought, you probably didn’t even care, because you assumed these things were all properly regulated and someone was looking out for you.

Enter ride-sharing. Anyone can be your driver now! Heck, any of your relatives who scare you with how they drive can now earn some coin by downloading an app, getting behind the wheel and giving strangers a ride. What a world! So let’s tick through that list again. Has anyone checked their driving record, insurance or criminal convictions? For some reason, those answers are more complicated.

Karl Susman

Karl is an insurance agency owner, insurance expert witness in state, federal and criminal courts, and radio talk show host. For more than 30 years, Karl has helped consumers understand the complex world of insurance. He provides actionable advice and distills complex insurance concepts into understandable options. He appears regularly in the media, offering commentary and analysis of insurance industry news, and advises lawmakers on legislation, programs and policies.

Since there are multiple ride-sharing companies, let’s talk this through in general terms without mentioning specific companies. Turns out, there are some checks on these drivers occurring in the background.

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The point I want to focus on — I’m sure you’re shocked — is the insurance for a ride-sharing driver. Who has it (the driver or the company), and whose will pay in the event of an accident and for what activity? Ride-sharing companies have policies that can potentially provide coverage in certain situations, but what about your personal insurance policy? Will that kick in and pay anything for you? Yes and no. And maybe, for good measure.

Personal auto insurance is designed for a person and the car they drive. In its most generic form, it works as it should. But what happens when you start driving for hire? You’re not just driving to drive or driving to work, school or a party. You’re driving to make some moola. That changes things. Also, what activity you’re doing while on the job impacts your coverage:

Are you driving around while waiting for someone to request a ride?
Have you accepted a fare and are driving to pick them up?
Are you driving a customer to their destination?
Are you dropping a customer off?

Whether your insurance policy will or won’t pay will be impacted by what job activity you were doing when a loss occurred. The ride-sharing company may offer a policy, and it also will or won’t pay depending on which stage of the job the loss occurred.

For a ride-sharing driver, the first order of business is to check with your insurance company to see if there is an endorsement (a fancy word for a change to your policy) that is available to cover you as a ride-sharing driver. If it does, this will be the easiest and likely the most cost-effective way to obtain coverage.

Do not — I repeat, do not — assume that you will automatically have coverage. Insurance policies are contracts, and you hoping your policy will provide coverage won’t change the words in the policy. Check with your insurer, agent or broker and find out what options are available for you and your specific situation.

OK, so what do you do if your insurance company gives you a big thumbs-down? Don’t fret. As Star Trek’s Mr. Spock famously said, “There are always possibilities.” Jump on that good ol’ computer, get online and start checking for a policy that will provide the coverage you need. If you are fortunate enough to be working with an independent broker, they may have options with an insurance company other than the one you are currently with, and you can see about obtaining the protection you need there.

For ride-sharing customers, always stay vigilant. Check with the ride-sharing company to see what requirements it has for its drivers and ask to see verification from the driver when they pick you up. We have gotten to a place where sometimes we have blind trust that things are as they should be, that others are looking out for our best interests, and things will be, well, OK.

With new options and markets opening up and becoming more mainstream, ride-sharing is here to stay, at least until Waymo’s self-driving cars are more widely accepted. (More on Waymo another time.)

Whether it is a taxi or any form of ride-sharing, a person behind the wheel or a computer with dozens of eyes on the road, keep that seat belt on and stay alert. Your life depends on it.

Want to learn more about insurance? Visit KarlSusman.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.