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Do I Need Commercial Auto Insurance For Uber?

New drivers join rideshare services like Uber every day. The prospect of working your own hours and using your personal vehicle for profit is appealing to many people. Before starting, they’ll make sure that their cars are up to Uber’s standard by having it cleaned and all minor issues resolved so that it looks new. However, there is always one aspect of becoming an Uber driver that many new drivers overlook –car insurance.

As a driver, you already have personal car insurance with a certain amount of coverage that you establish at the time of purchase. Whether it’s just the liability or the full bundle, 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, but when you’re on the Uber clock transporting passengers, the coverage is compromised. 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.

Gaps in your coverage are the least of your worries when you have to be concerned about losing your insurance. However, there is a solution –commercial auto insurance and rideshare coverage.

Why Won’t My Personal Car Insurance Cover Me While Working With Uber?

When it comes to Uber, it’s fair to refer to your personal car insurance as “offline insurance” because it only covers you while you’re offline in the app. Personal policies don’t cover commercial vehicle use. Because of this, there are what are known as “gaps in insurance,” where your coverage lapses for a period of time. This isn’t just a headache for you as the policyholder; it’s also a hassle for the insurance company too and grounds for policy cancellation.

Having your policy reinstated isn’t exactly an easy task either. Your best bet, and smartest decision, would be to invest in commercial auto insurance. Uber offers their own commercial policy to its drivers so they can be insured while on the clock.

How Does Uber’s Commercial Auto Insurance Work?

In order to understand what a rideshare company like Uber offers in their commercial insurance, you’ll need to understand the stages the coverage is separated into. Keep in mind that even commercial 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 turned on the Uber app and went online to wait for a ride request. You may be waiting in a parking lot or driving around until you get one. You’re no longer covered by your personal policy, and the commercial insurance coverage by Uber is limited.
  • Stage 2 - You’ve received a ride request and are on the way to pick up the customer(s). The rideshare coverage that Uber provided 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.

What Does Commercial Auto Insurance Include?

If you’re ever driving for business purposes, commercial insurance is always a must. Not just rideshare drivers, but truckers and company vehicles carry it too. Business owners will take out a commercial policy on their fleet of company cars too. In its most basic coverage, commercial auto insurance is essentially liability coverage for yourself and employees if they get into an accident that is their fault. Liability coverage includes personal injury for the other driver’s medical expenses if they are injured in a collision and property damage for covering repairs to their car.

Commercial can be bought for anything from a four-door sedan to a delivery truck. What truly determines whether or not it qualifies for commercial coverage is the relationship it has with your occupation or work. This doesn’t include driving to and from work but literally using your vehicle for work such as delivery runs, storing equipment for on-site jobs, and rideshare in some cases.

The one drawback to commercial insurance would be the price, as its yearly cost may take significant space on your budget. The standard annual cost of commercial insurance is around $1,200. On average, a policyholder pays anywhere from $12,000 to $24,000 depending on the deductibles, which can be just as high. For business owners and fleet managers, this is a necessary cost to keep their business insured. For Uber and rideshare drivers, it may hinder their ability to bring in profits because they may be working part-time. For that reason, there’s specialized insurance for rideshare drivers creatively called “rideshare insurance.”

What is Rideshare Insurance?

Rideshare insurance is the cheaper alternative to commercial insurance for rideshare drivers or drivers who work with a transportation company. While it works wonders for part-time drivers, it works just as well with those who drive full time.

As previously mentioned, the insurance that a rideshare company like Uber provides to their 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 insurance 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:

  • Cheaper deductibles - Not only are rideshare deductibles cheaper than that of commercial insurance, but they also go for less than those offered by Uber.
  • Full coverage - In addition to liability coverage, you may also add on comprehensive and collision damage to your rideshare policy.
  • Coverage for all stages - Buying rideshare insurance from an insurance company provides property 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 own insurance or be added to an existing personal policy. This gives the driver more control over it than the rideshare company like Uber.
  • Low-cost - The best selling point of all 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?

To review, 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 while your app is active on your way to a rider. However, Uber won’t provide full coverage with collision or comprehensive. If you’d like to have your own car insured for all stages of ridesharing with all types of coverage, then 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 cost. Commercial insurance is typically used by business owners with drivers working for them as opposed to independent rideshare drivers. Uber drives would rather take their chances with the $350 annual fee as opposed to the $12,000 to $24,000 one.

In conclusion, it’s absolutely necessary to buy commercial auto insurance when driving for a service like Uber. In ridesharing, there are several complications for insurance since you’re on the work clock. Insurance companies work with drivers every day to find the right rate for part-time and full-time drivers. Looking for more information on this topic, Read our article about Do Lyft And Uber Drivers Get Reimbursed For Tolls?