Considering Working For a Rideshare Service? Understand Your Insurance Risk First.
There’s a new and growing trend to share rides and even houses. It sounds great and is spun as a way for housewives, college students, and even families to earn extra money. But, your participation in these types of programs has an impact on several things, including your insurance coverage.
What is Ridesharing?
The concept is called real-time ridesharing. What it is, is a service that provides one-time shared rides with very little notice. It is called many names, and while there is a company called Rideshare, there are other companies that offer the same, or very similar, services. Uber, which The Zebra reports averages 1.1 million ride requests per week, perhaps is the most well-known. There’s also Zimride, formerly named Lyft.
The Appeal of Ridesharing
While you may not think ridesharing presents a profitable line of work on the side, the Washington Post reports that it can be highly profitable. For instance, a New York City cab drivers earns, on average, $30,000 a year working full time (the driver, not the company owner). An Uber (one of the ridesharing services) driver working 40 hours a week in the Big Apple could easily earn $90,766 a year.
These numbers are possible without making the $840,000 investment in a medallion that is required for taxi services, which is a substantial drop from the $1.3 million price tag of these medallions in 2013, according to CNBC. There are some investments though, in the vehicle, fuel, and maintenance, but the compensation can more than make up for these costs in most cases.
Obviously, the pay won’t be the same in more rural areas or even small U.S. cities, but there is the potential for profit in almost any area for people who are willing to accept the risks that go along with providing this type of service to strangers.
The real appeal of Uber for many drivers is that it allows them to operate on their terms. Drivers get to drive their own cars, set their own schedules, and receive weekly payments for their efforts. Other ridesharing services offer similar incentives for drivers as well.
Risks of Sharing Rides
The ridesharing concept is still quite new. While taxi companies and limo services have been around for decades and are heavily regulated to meet certain safety standards, no such regulations exist for rideshare services yet.
Taxi companies, for instance, carry insurance that covers their cars, liability coverage for their drivers, and their passengers. The same is not true of rideshare companies, with the exception of the state of California which recently passed legislation requiring rideshare services to provide $1 million of liability insurance for their drivers.
Otherwise, drivers are on their own and many find out, only after the fact, that their insurance does not cover their commercial activities as rideshare drivers. This means, per the Property Casualty Insurers Association of America, that the driver can be held responsible for a wide range of damages associated with an accident, including the following:
- Damages to driver’s vehicle
- Repairs to the other car
- Medical payments
- Legal fees
- Legal damages
The problem is that there isn’t currently an insurance package that provides for both the commercial and private use of a single car. However, even if the rideshare company drivers work for provides insurance coverage, there is often a gap between personal and professional coverage with many insurance companies denying claims and dropping coverage upon discovering drivers are using vehicles for rideshare programs.
Insurance issues regarding business use for personal vehicles isn’t limited to Uber and similar rideshare services. It extends to people who use their personal vehicles to deliver newspapers, flowers, Chinese food, or pizza. Keep in mind, that if you use your personal vehicle for business use, you aren’t covered under your personal policy. It’s important to keep an open dialog with your insurance provider to make sure that you and your vehicle are properly insured for either personal or business use.
How Can Rideshare Drivers Protect Themselves?
The most important thing to do is to have a firm understanding of the type of coverage you have both from the company you’ve partnered with and your personal auto insurance. You need to know specific things that are covered and excluded. You also need to speak, with your insurance agent and discuss your plans and what kind of coverage you need.
The National Association of Insurance Commissioners warns that drivers should be aware that some insurance companies will not provide personal insurance coverage at all if you hire out your vehicle and some will charge an added premium – a small price to pay for the peace of mind it provides.
There are many potential and highly profitable benefits for rideshare drivers. The key to success is to mitigate the risks, with the right type of insurance coverage, in order to maximize the rewards.