As a driver, you already have a personal auto policy with a certain amount of coverage you establish at the time of purchase. Whether it’s just liability insurance or full coverage, there are limits to what a personal auto insurance policy can cover.
Naturally, you’re always insured when you use your car for personal reasons. However, the coverage is compromised when you’re on the Uber clock transporting passengers. When you turn on your Uber app, you’re officially on the job, and your car is now being used for commercial or business purposes. If you were to file a claim while driving a customer, your insurance company wouldn’t accept it. They may even choose to cancel your policy altogether.
Do You Need Special Insurance to Drive for Uber, Lyft, or other Ridesharing companies?
Regarding Uber, it’s fair to refer to your personal car insurance as “offline insurance” because it only covers you. At the same time, you’re offline in the app. Individual policies don’t cover commercial vehicle use. Because of this, there are known as “gaps in insurance,” where your coverage lapses for some time. This is more than just a headache for you as the policyholder; it’s also a hassle for the insurance company and grounds for policy cancellation.
Having your personal car insurance policy reinstated is a challenging task, too. Investing in a commercial auto insurance policy is your best bet and most intelligent decision. Uber offers its drivers a commercial policy to be insured while on the clock.
Why do Rideshare drivers need Special Insurance?
Rideshare drivers need specialized insurance due to the unique nature of their driving responsibilities and the associated risks that differ significantly from those of personal vehicle use.
When driving for a transportation network company like Uber or Lyft, drivers enter a distinct operational category that extends beyond the scope of standard personal auto insurance policies. Personal auto insurance is designed to cover everyday driving activities such as commuting, errands, or leisure travel.
However, these policies typically exclude coverage for commercial activities, including ridesharing. When a driver logs into a rideshare app, they are considered operating their vehicle for a commercial purpose. This shift from personal to commercial use creates coverage gaps, as personal policies do not cover incidents. In contrast, the car is used for ridesharing services.
To address this gap, many rideshare companies offer contingent coverage that activates when the driver is logged into the app but does not have a passenger. This contingent coverage often provides limited protection and may only kick in after the driver’s policy’s coverage limits are exhausted.
However, this additional coverage is not comprehensive and can leave significant gaps, mainly when the commercial driver is waiting for a ride request but has yet to accept one. This is where rideshare insurance, a specific policy or rideshare endorsement, becomes essential.
Rideshare insurance bridges the gap between personal auto policies and the coverage provided by rideshare companies. It ensures continuous coverage throughout the rideshare driving process – from logging into the app to dropping off passengers.
Without this specialized insurance, rideshare drivers could face substantial financial risk and potential liability in the event of an accident or incident during their ridesharing activities.
How Does Uber’s Insurance Work?
To understand what a rideshare company like Uber offers in their commercial auto insurance, you’ll need to understand the stages in which the coverage is separated. Remember that even commercial auto insurance is limited in the stages where it would provide coverage.
The stages of ridesharing are:
- Stage 0: You’re in your car with the Uber or rideshare app turned off. You’re covered by your personal car insurance so long as you remain offline on the app.
- Stage 1 - You turn on the Uber app and wait for a ride request online. You may be waiting in a parking lot or driving around until you get one. Your policy no longer covers you; Uber’s commercial insurance coverage is limited.
- Stage 2 - You’ve received a ride request and are ready to pick up the customer(s). Uber’s rideshare coverage fully kicks in at this point, covering you.
- Stage 3 - Now, the rideshare customer has entered your car, and you’re driving them to their destination. Your commercial insurance continues to cover you in this stage before heading back to stage 1.
How does Rideshare Insurance for Uber Work?
Rideshare insurance is a cheaper alternative to commercial auto insurance for rideshare drivers or drivers who work with a transportation network company. While it works wonders for part-time drivers, it works just as well with those who drive full-time.
The insurance that a rideshare company like Uber provides to its drivers has limits in its coverage. When you’re in stages 1 and 2, waiting for and picking up riders, you may not be covered by that or your personal insurance. Uber’s insurance only exists to insure you and your rider –not when you’re cruising around looking for a customer. Rideshare insurance, like commercial, offers protection from lapses in coverage during these times.
Rideshare insurance may be a better investment because it includes extra coverage:
- Cheaper deductibles - Not only are rideshare deductibles cheaper than those of commercial insurance, but they also go for less than those offered by Uber.
- Full coverage - Besides bodily injury liability coverage, you may add comprehensive and collision insurance to your rideshare policy.
- Coverage for all stages - Buying rideshare insurance from an insurance company provides property damage and injury protection for all stages of ridesharing, even when waiting for a rider.
- New or add-on policy - A rideshare policy can function as its insurance or be added to an existing personal policy. This gives the driver more control than rideshare companies like Uber.
- Low-cost - The best selling point is that rideshare insurance is a cheap option with an average of $350 annually. That’s around $27 monthly.
What Are The Main Differences Between Rideshare and Commercial Insurance?
Your personal coverage ends when you turn on your rideshare app. That’s when commercial or rideshare insurance comes into play. Commercial insurance provided by the company provides you with liability coverage should you cause an accident. At the same time, your app is active on your way to a rider.
However, Uber will only provide partial coverage with collision or comprehensive coverage. Suppose you’d like to have your car insured for all stages of ridesharing with all types of coverage. In that case, it’s time to look at insurance company-sold rideshare or commercial policies.
Rideshare and commercial insurance are consistent in the protection they offer. The main difference between them is the insurance cost. Business owners typically use commercial insurance with drivers working for them instead of independent rideshare drivers. Uber drivers would take their chances with the $350 annual fee rather than the $12,000 to $24,000 one.
Buying commercial auto insurance when driving for a service like Uber is necessary. There are several insurance complications in ridesharing since you’re on the work clock. Insurance companies work with drivers daily to find the correct rate for part-time and full-time drivers. For more information on this topic, Read our article about Do Lyft And Uber Drivers Get Reimbursed For Tolls?
