Updated April 11, 2022
Uber and Lyft are now more than just convenient rideshare apps. Delivery services are on the rise through apps like Uber Eats, GrubHub, and DoorDash and while they are easy to use through their mobile apps and affordable for consumers, confusion can arise for working drivers – especially when it comes to understanding insurance coverages. Here are some things to consider before joining a company as a rideshare or delivery employee.
Am I Covered?
Rideshare and delivery companies promote themselves as simply the facilitator of these types of transactions. The companies do not own the cars and drivers are subcontractors not employees. Some states are enacting legislation to regulate these entities and it’s creating problems for insurance companies and drivers.
Both Uber and Lyft offer insurance to their drivers and passengers, but it isn’t as simple as just saying you are, or are not covered. There are contingent policies listed with Lyft, and 3rd party policies with Uber – however, insurance is such a complicated topic, and when lawyers and government get involved, it becomes all the more confusing. Keep in mind that these regulations and coverages vary by state, as well. If you’re considering joining a delivery or rideshare organization, do your homework.
Your personal auto policy, used by most insurance companies today, says that you are not covered if you are transporting passengers for a fee. Uber and Lyft have commercial policies that indicate they will provide coverage to the driver when a passenger is in the vehicle, but you are not completely covered.
So, what about before and after a drive?
When you drive for a Transportation Network Company (TNC) like Uber or Lyft, your car becomes a commercial vehicle since you are providing a livery or delivery service for a fee which is excluded on a personal auto policy. Just because Uber says they have a policy that will cover you does not mean much, dig deeper into that contract.
TNC transactions have 3 periods:
- The app is turned off – personal insurance coverage applies.
- The app is turned on and the driver is waiting for a fare or delivery.
- The driver has accepted a fare and is en route or in process of completing a trip.
Typically a TNC will provide coverage for periods 2 and 3, but period 1 is not covered. If you have an accident during period one, your personal auto may not respond, and neither will the TNC coverage. Some companies are developing special endorsements to provide coverage during this period for an additional fee, while others are not taking on this exposure and are beefing up their policy exclusions.
Before you decide to work for a TNC, do your homework – call your agent to find out how your company deals with the TNC exposure. Also get a copy of the contract with the TNC that shows the periods when the TNC provides coverage as well as what limits and deductibles their policy includes. In many cases their deductibles are $2,500 or more.
Could I Get A Commercial Auto Policy?
Commercial auto policies are one way to resolve these problems, but unless you are planning on doing a lot of driving, this probably is not a financially feasible idea. A full coverage commercial auto policy for someone driving for livery purposes could easily exceed $2000 per year – that’s a lot of cost to assume, especially if you are only driving for Uber or Lyft on a part-time basis. Also, as of now there are only very few companies that are willing to offer that coverage, meaning rate shopping is not always an option.
Currently, much of the burden lies with the drivers, and potentially puts the driver in a situation where they have little to gain and a lot to lose (personal assets and future earnings). Until states set guidelines and pass laws to regulate entities such as Uber and Lyft, we are at a stand still.
Some insurance companies offer rideshare endorsements that you can add to your insurance policy for additional protection. If you are currently a TNC employee or are considering employment through one of these companies, give us a call to explore your options.