We're in an era where flexible side gigs for a little extra cash are becoming increasingly popular and accessible, from food delivery to ridesharing to renting out a spare bedroom. Since we deal specifically with auto insurance, we thought we’d touch on ridesharing with companies like Uber and Lyft, or what we call transportation network companies (TNCs).
The TNC boom has been quite impressive after Uber launched in 2009, but it hasn't come without insurance kinks to work out.
Exposing the Insurance Gap
In 2013, an Uber driver struck and killed a six-year-old while working, exposing a huge insurance gap. At the time, Uber provided insurance for drivers while they were responding to a pick-up request or had a passenger in the car. Since the driver didn’t have a passenger or an active request, he didn't fall under Uber's coverage.
Most would think the driver could just use his personal coverage in this instance, since almost every state requires some form of auto insurance. However, since the driver had the app on and was open to requests, he was seen as using his vehicle for business or commercial use, which is not usually covered in a personal policy. Eventually the driver's insurance company allowed him to use his maximum limit of his coverage, but the lawsuit resulting from the accident definitely stirred up a lot of questions.
Fixing the Gap
- When you have the app on but don't have a passenger in the car yet:
- Both Uber and Lyft provide liability coverage with a $50,000 limit per person, $100,000 per accident and a $25,000 property damage limit.
- On your way to pick up a driver:
- Uber covers you for up to $1,000,000 for both liability and Uninsured Motorist coverage. If your personal coverage includes Collision and Comprehensive, they will provide it as well, with a $1,000 deductible, up to the cash value of your vehicle.
- Lyft also provides a $1,000,000 limit for liability and Uninsured Motorist coverage. And as long as you have Comprehensive and Collision coverage on your personal policy, Lyft will provide both with $2,500 deductibles and $50,000 limits.
- While driving with a passenger:
- For both, you have the same coverage you did while on your way to pick a passenger up, except now the passenger is also covered.
- While the app is off:
- Your personal coverage applies.
Why There Is Still a Grey Area
While it may look like all of the bases are covered, insurance and transportation network companies are still finding issues with the mixed coverage. For instance, you may have higher limits on your personal coverage than the TNC's, but be forced to take the lesser amount because you were technically available for a ride request.
Another instance: On Uber's site, it tells you that you're covered by Uber if you are working and hit by another driver who is at fault, but should check to see if you're also covered by your personal coverage. Your personal coverage might cover you, and it could be advantageous for a higher limit, but if your insurance company doesn't allow business use on their personal policies, and considers working for a TNC as business, your policy may be rewritten as a non-renew, forcing you to change companies down the road. Not only would it be inconvenient to find a new company, but also any loyalty discounts you earned could be lost.
Why Insurance Companies Seem Strict with TNCs
When an insurance company rates you for your personal policy, it gets a general idea of how you'll use your vehicle so it can determine how much it will cost to cover the vehicle. How long is your commute to work? How many people will be driving it? Do you live in a highly populated area? Etc.
All of those questions fit nicely in insurance rating plans, but adding a sporadic, part-time gig to drive passengers throws the plans off—now you're driving more than anticipated, at inconsistent times and potentially in areas not accounted for. A lot insurance companies have commercial policies to account for the different vehicle usage, but they may not make sense for someone who only wants to drive for a TNC every so often.
Since TNCs don’t seem to be going anywhere anytime soon, insurance companies are starting to create ridesharing policies that would cover the gap and be cheaper than a traditional commercial use policy. It may take some time before the best approach is found, but if you're currently, or considering, driving for a TNC, be sure to check the details of your personal coverage.
Where Does Say Stand with Ridesharing?
Say doesn't currently offer a ridesharing policy since we haven't quite determined the best hybrid-style rating plan for our drivers. It doesn't mean someday we won't, but we'd like to make sure that if we do, we do it right.
Posted May 18, 2017 in insurance know-how.