Ridesharing services like Uber and Lyft are changing the taxi industry. But just like with any other budding field, there are still some kinks that need to be worked out. Drivers don’t necessarily need to meet the same qualifications and insurance requirements that chauffeurs and professional taxi services must have.

Accidents are a serious concern for rideshare drivers. In 2015, there were 245,000 accidents just in the state of Texas. It’s important to ensure that you’re fully covered when out on the road.

If you’re thinking of driving for a rideshare service, there are steps you need to take to protect yourself from liability.

Don’t Rely on Your Personal Insurance

No matter which company you drive for, all rideshare drivers are required to have personal auto insurance. But will that insurance policy cover you and your passengers in the event of an accident? Probably not – although you should call your insurer to find out.

In most cases, personal insurance policies have exclusions for when you’re driving for commercial purposes. That includes ridesharing programs. Ridesharing driving is typically considered business-related driving.

Moral of the story: Don’t rely on your personal auto insurance policy to cover you if you’re in an accident while rideshare driving.

Rideshare Driver Insurance is Available through Major Insurers

Most major insurance companies offer rideshare-friendly personal insurance. The important thing here is to find a policy that offers “period 1” coverage, which will cover you while you’re waiting for a ride request. This will supplement Uber’s insurance coverage.

State Farm, for example, offers policies that extend your personal coverage (minus liability) while driving for a rideshare service. It will cover you:

  • While the app is on, and you’re available for hire
  • You’re matched with a rider
  • You’re transporting a passenger
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If you want even more coverage than what rideshare policies offer, you might consider a commercial auto insurance policy. Commercial insurance will cover both liability and vehicle damage that occurs while you’re driving passengers around.

Opting not to purchase additional coverage can cost you big time in the long run. The average vehicle claim is $45,000. If you don’t have that kind of money laying around, you’ll want to make sure you get the coverage you need.

Uber Car Insurance is Supplemental

If you plan to drive for Uber, you should know that the company does provide some insurance coverage – but only when the app is on. Supplemental coverage is provided while you’re driving passengers around, but once you turn off the app, you’re no longer covered by their policy.

It’s important to keep in mind that this supplemental coverage may not provide the collision or comprehensive coverage that you need. So, if an accident occurs, Uber’s insurance may not cover damage to your vehicle.

Set Up an LLC or Corporation

Want even more coverage against liability? Consider setting up an LLC or a corporation. But there’s one important thing you need to keep in mind when setting up a formal business.

An LLC or a corporation will protect you from contractual liability issues, but not tort. In other words, if you didn’t drive the vehicle safely and caused an accident, you would still be held liable for the incident. You would, however, be protected from contractual liability issues.

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