You’ve just picked up your first passenger and are taking them to the airport. Instead of focusing on the road, your attention is diverted to your passenger when you’ve run a red light and hit another car. In these situations, rideshare insurance is a standalone policy or endorsement on your personal auto policy that provides liability coverage for you.
While the cost and limits may vary depending on the insurance provider, ultimately, it is a coverage too essential to ignore because, in that scenario, your personal auto coverage will not offer protection.
Key Takeaways:
- Personal auto insurance will not cover your vehicle or provide liability if you are using your vehicle for a business at the time of the loss.
- Ridesharing insurance adds coverage to a personal auto policy for when you use your vehicle for services.
- Rideshare insurance is either a standalone policy or can be purchased as an endorsement on your auto insurance.
- Most transportation network companies (TNC), like Uber, provide insurance for their drivers, but they can still require you to carry additional coverage.
Rideshare Insurance: What It Is
Rideshare insurance is a specialized type of coverage that provides liability protection for your rideshare business. Ridesharing insurance is limited to coverage when you are transporting other people. It does not apply to delivering goods or renting your vehicle out to others for their use.
This type of insurance is not for someone who drives a professional vehicle that transports others, such as a taxi cab or limousine driver. In that situation, such a person needs a dedicated commercial auto policy. Rideshare insurance is for someone who uses their vehicle to provide transportation for others utilizing a TNC.
Personal auto policies have an exclusion that states if you are using your vehicle for a livery (transportation) business, the coverage on your policy does not apply. Rideshare insurance can also be purchased for your vehicle’s first-party coverage.
When purchasing rideshare insurance, you’ll have two options: an increasing number of personal auto insurers offer it as an endorsement. However, if that isn’t an option, you can purchase it as a standalone commercial auto policy. Rideshare insurance costs will vary depending on the provider, but adding an endorsement can range from between $6 to $20 a month.
Risks of Driving Without Rideshare Insurance
There are several reasons why you should get rideshare insurance. All of them come down to the significant risk you bring on yourself if you decide to drive without rideshare insurance.
First, there are state laws to consider. New York has required coverages and limits for anyone who drives for a TNC. The coverage amount varies depending on whether you are actively driving or not. For example, New York requires you to carry $75,000 in bodily injury coverage if you drive for a TNC, and when you have a passenger, that amount increases to at least $1,250,000. Not carrying rideshare insurance would put you in violation of state law.
Another consideration is the financial risk. I have handled many claims for rideshare losses where the driver failed to notify their insurance company that they were driving for a TNC. They assumed their personal auto policy would cover any loss, and since they had insurance, they met the requirement to drive for the TNC. Unfortunately, there was no liability or first-party coverage when the loss occurred since they were logged in and driving for a TNC.
The problems of being uninsured in that situation can continue. The insurance company will likely cancel your policy. Depending on what you agreed to when you signed up, it might pursue a material misrepresentation investigation against you, a form of insurance fraud. Either scenario can make it harder and costlier for you to find auto insurance simply.
How Ridesharing Insurance Works
While most TNCs will offer insurance, their insurance may only sometimes apply. The application of coverage largely depends on the app’s status and what you do when the loss occurs. It may sound wild, but coverage can come down to sending a screenshot from your phone to show whether you were logged in when the loss occurred. For example:
- Offline: When driving your vehicle but not logging onto the TNC app, your auto policy provides coverage.
- Logged on: When you are logged on but not en route to pick someone up or transport a passenger, the TNC insurance should be primary, but your personal auto insurance may also come into play.
- En route or transporting: When you are en route to pick someone up, or you have a passenger, rideshare insurance will be the primary coverage.
Lyft, Uber, and similar companies have deductibles that the driver is responsible for, and the amounts can be high. Uber’s deductible is $2,500. Rideshare insurance with some companies will offset the deductible cost by covering it for you.
The status of the app is important. It will be used to determine which insurance policy pays out and can have a long-term impact on your personal auto rates.
Rideshare Insurance vs Delivery Driver Insurance
Rideshare insurance is not the same as delivery driver insurance. Rideshare insurance is for people who use their vehicle to transport others by connecting through a TNC. Delivery driver insurance is for someone who delivers a product on behalf of a company. This can be someone driving for a restaurant or a company like Instacart.
Rideshare insurance can be purchased independently, and most TNC companies provide some level of coverage. Delivery driver insurance is harder to find, and most companies do not insure their drivers.
If you are operating as a delivery driver for a restaurant, the company should purchase the hired and non-owned auto endorsement on their general liability insurance policy. If they do that, then liability coverage is extended to its drivers.
Rideshare Insurance on Reddit
I reviewed several posts on Reddit regarding rideshare insurance. Most posts covered two topics: its necessity and rideshare insurance cost. Costs vary based on what users share, but most agree that you can purchase it as an endorsement in many states.
The endorsement cost is relatively low, with most paying $20 or less. However, rideshare insurance costs significantly more for some. The reason for wide variations will always come down to claims history, the type of vehicle, the driver’s area, and how the specific carrier assesses the risk.
In my experience, Reddit is often unreliable for insurance advice. This time, there are a lot of users sharing their own experiences, and it comes down to one thing: get rideshare insurance. It isn’t worth going without it, especially if your insurance company finds out and cancels your policy for fraud. If that happens, it will be challenging to find insurance again, and you can expect to pay a high premium.
Bottom Line
The sharing economy continues to fill a financial gap for many people, and insurance companies are slowly learning how to handle it. When I worked in the insurance industry, there were no ride-sharing endorsements. But now, many providers offer rideshare insurance to complement what is offered by TNCs.
Rideshare insurance is an important and necessary coverage to help your vehicle and other parties impacted by a loss when using your car to transport someone. The risk of not being insured and the potential cost of handling a loss while uninsured is simply not worth it.
If you need a standalone commercial auto policy, Next Insurance has recently launched one. You can get a quote and purchase a policy online or speak with a representative.
