Auto insurance has historically been divided into personal auto insurance and commercial auto insurance based on how the auto is used. From the insurance industry perspective, the line has always been clear-cut — until the advent of ride-sharing services such as Uber and Lyft, where average citizens sign up to use their cars as a form of independent taxi service through smartphone apps.
These services can put drivers in insurance no-man’s land. Ride-sharing companies generally offer insurance coverage while carrying passengers but lesser or no coverage otherwise, and none if you are not signed into the service’s app (in essence, like a taxi that is off the clock). Most personal policies discourage ride-sharing since the risk of carrying passengers was not priced into the policy, and you run the risk of your personal carrier dropping your coverage if they realize you are a ride-share driver.
In that environment, what can you do to protect yourself in case of an accident? If you are fortunate, your policies will be complementary; your ride-share company covers you during ride-sharing times and your personal policy covers you otherwise. Let’s start by looking at the coverage from several of the ride-sharing services.
Uber and Lyft both pay up to $1 million per incident with $1 million uninsured/underinsured motorist (UI/UM) coverage in accidents where you are struck by a UI/UM driver. Collision and comprehensive (C/C) policies are $50,000 while carrying passengers, and without passengers the policy is 50/100/25 ($50,000 limit for an individual bodily injury, $100,000 for total bodily injuries, and $25,000 for property damage). C/C deductibles are $1,000 for Lyft and $2,500 for Uber.
Sidecar is similar but carries no UI/UM or coverage without passengers and the C/C deductible is $500.
The C/C coverage offered by the ride-share service may only be valid if you have C/C on your personal policy as well.
This seems to be complementary coverage but there is a gap to consider. The policies without passengers (contingency policies) generally require you to go through your personal auto insurer first, and the ride-share policies kick in if your claims are denied. However, this puts you at risk of cancellation of your personal policy if you have not been upfront about ride-sharing.
A bigger insurance gap may be with your health. If you are not at fault and are injured, the driver at fault is responsible for your medical bills, and the ride-share service will cover insurance shortfalls through their underinsured motorist coverage. However, if you are at fault and injured, you may be out of luck.
Since you were injured in an auto accident, auto insurance is expected to pay first — but if your personal policy does not allow for ride-sharing they may be able to deny your claim. Meanwhile, your health insurer may consider it a workplace injury that should be covered by the ride-share company. Ride-share companies refuse to cover your medical bills if you are at fault. It is a nasty catch-22 that you should clear up before you begin. Consider buying a workmen’s compensation policy to cover you if your mix of insurers makes this area a no-man’s land.
Eventually, this is going to be solved by a combination of the companies’ actions and legislative efforts to answer the fundamental questions: If you are driving for a ride-sharing service, are you considered a business for licensing and insurance purposes, and if so, how is the risk of a ride-sharing service assessed?
Some states have already partially addressed the issue. California requires you to register your car with the DMV as a commercial vehicle. Registering as a commercial vehicle should preclude you from acquiring personal coverage on that vehicle, and lying about the use to acquire personal insurance will void the policy.
In the meantime, keep an eye on the news and on your insurer’s and ride-share service’s websites for any changes in policy. If the current situation makes you nervous, consider purchasing a specialized ride-sharing policy if one is available in your area (for example, Geico offers one in Maryland and Virginia only). You may also consider a full-blown commercial policy. You may have to pull in more customers to pay off the difference, but at least you will be spared the uncertainty of where you stand in case of an accident.
The overall message is to communicate honestly with your personal insurers (auto and health) and the ride-share company upfront about your coverage and exclusions at all three stages (app off, app on but no accepted fare, and accepted fare/passenger mode). Do not guess or assume. You could end up falling into a nightmarish set of costs, all to make a few bucks through ride-sharing or theoretically saving a few bucks on insurance