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Driving for a Rideshare? Will Your Car Insurance Protect You?

Driving for a Rideshare? Will Your Car Insurance Protect You?

March 8, 2019

With the sustained popularity of Rideshare companies like Uber and Lyft, ridesharing has also emerged as a way for individuals to generate income either on a primary or supplementary basis.  We have received several inquiries on this topic from clients, and we must caution that driving for rideshare companies can create serious concern in the area of Personal Risk. Personal insurance policies present major gaps in coverage when an individual is driving for programs such as Uber and Lyft in their personal vehicle.

There are three different stages to a Rideshare that have distinct implications in personal risk insurance.

Stage 1: Seeking Fare – Driver is online with driver app waiting to receive a trip request.
Stage 2: In Route – Driver has accepted a new fare and is on the way for pick-up.
Stage 3: Trip – Rider is in the vehicle on the way for drop off.

Typically, Rideshare companies provide some liability protection for their drivers, however, the amount of coverage is affected by whether the driver is engaged in a fare or not. Here is a brief summary of what insurance coverage is typically provided by Rideshare companies:

  • Stage 1: Liability limits are low during Stage 1, and comprehensive and collision are nonexistent.  Typical Liability coverage limits are 50/100/25 ($50,000 per person bodily injury, up to $100,000 per incident, and $25,000 for property damage). This is contingent liability coverage in most states. That means that you, as the driver, must make a claim with your personal insurer first. If your insurer denies your claim, the Rideshare’s insurance should drop down as primary.  Uninsured/ underinsured motorist coverage is not provided during Stage 1.
  • Stage 2 and 3: Liability limits increase (up to $1 million according to certain Rideshare companies), but collision and comprehensive coverage start to get a bit complicated. Comprehensive and collision coverage is offered during Stage 2 and 3, but it is contingent coverage. If you have comprehensive and collision on your personal policy, but your insurer denies your claim, the Rideshares company insurance should drop down as primary. Most of the Rideshare company policies have a $1,000 deductible, which you will, of course, have to cover. For uninsured/underinsured motorist a $1 million policy is in force, which should be sufficient.

Personal risk insurance was not created to be used for Ridesharing. All personal risk insurance carriers have the right to deny any claim that takes place while driving your vehicle for use as a Rideshare or Taxi. There are personal insurance carriers that will allow you to endorse coverage for Ridesharing. Unfortunately, it does come at a cost. Anywhere from 25% to 50% rate increases should be expected for endorsing Ridesharing coverage on your personal policy.  Insurance companies will seek to collect additional premium whenever the perceived exposure to loss increases.  Certainly engaging in commercial activities as a Rideshare driver in your personal vehicle will increase the potential for a claim to occur.

Our suggested best practice would be to contact your personal risk insurance agent prior to driving for a Rideshare company. By doing this, you could avoid some major liability issues that could have serious negative implications on your personal finances.  All of that additional income earned by driving for Uber or Lyft could look like nothing if you don’t first address personal risk issues created by Ridesharing.

Interested in a consultation on auto insurance?  Contact us to get started.
Author: Tim MacLean, Personal Risk Department Manager

Category: Personal Risk