4 Rideshare Insurance Mistakes Hitting Uber & Lyft Drivers in Their Wallets
It was a concept that quickly caught on in 2009. Allow anybody to use his or her automobile as a taxi. Then, using their smartphone, riders may “hail that taxi.” Brilliant!
Suddenly, rideshare apps like Uber and Lyft came onto the scene, providing people with an alternative to traditional taxis. These new services were faster and more convenient than taxi cabs, and they quickly became popular among users.
Though it may seem like all you need to start a side business is a driver’s license and a car, there is much more that goes into it. Rideshare drivers in every state are overlooking one crucial aspect of this wonderful opportunity: rideshare insurance.
In a recent poll of 1,000 rideshare drivers, a full 77% did not have adequate insurance. In other words, with every pickup, you’re putting your money at serious risk.
By taking a closer look at these four insurance mistakes, you can decide for yourself whether or not you are putting yourself in unnecessary danger.
Rideshare Insurance Mistake #1: Lying to your insurance provider
Did you know that if there’s a major change in your vehicle or driving habits, you’re required by law to notify your auto insurance company? For example, when you buy a new car, have an accident, or upgrade your teenage daughter’s vehicle.
Also, qualifying is making your automobile into a job. You’re increasing the number of miles you travel by a factor of ten. This means you’re much more likely to have an accident, not to mention the fact that you’re transporting precious cargo: other people!
If you don’t tell your insurance company that you drive for Lyft or Uber, it’s like you’re lying to them. Not disclosing important information is the same as not telling your health insurance provider about a history of heart problems.
Yes, isn’t it strange that no one tells their automobile insurance provider? Yes, many people do this. This may be a short-term victory. If you have an accident while being a rideshare driver, unfortunately, three things may happen:
- To begin, you may be required to pay a significant portion of the bill. Of course, there are any traffic citations included in that total.
- Second, your costs may substantially rise.
- Third, if you lie to your insurance carrier they will probably drop you.
So, let’s be honest from the start. Talk with your auto insurance provider about options for rideshare coverage.
Rideshare Insurance Mistake #2: Assuming Uber or Lyft has your back
“But my rideshare company assured me I was covered,” you could be thinking. Yes, you are protected, but you still run a significant risk. And by danger, I mean money and debt.
There are 3 different periods of rideshare insurance. Think of periods as the phases a rideshare driver goes through.
- Online and WITHOUT a ride request. You’re just cruising around with nobody in the car and no pickup requests.
- Online and WITH a ride request. You could be en route to a rider or even parked and waiting for a rider.
- Online with a RIDER in your car. Woo-hoo, you’re making money!
The difficulty is that Uber and Lyft’s rideshare insurance only covers drivers during Periods 2 and 3, but they cease service during Period 1! If you get into an accident during Period 1, you may end up paying a lot of money.
Because you are a rideshare driver, you won’t have collision coverage from your company. Furthermore, since you “lied” to your insurance provider and didn’t disclose that you were a rideshare driver, they will most certainly not cover you.
Plus, it can all rack up quickly! Repairs. Injuries. Even lawsuits. Suddenly your side hustle is more like a burdensome hobby.
Insurance for Uber drivers
Uber keeps Uninsured or Underinsured Motorist Bodily Injury coverage and/or first-party injury protection coverage on your behalf once you’ve accepted a trip. This insurance may cover both physical injuries to yourself and your passengers.
While Uber maintains commercial vehicle insurance on your behalf while you are utilizing the Driver app, adding rideshare and delivery coverage to your personal auto insurance may help safeguard you further.
Many automobile insurance providers will accept a lower personal coverage deductible if you add comprehensive and collision coverage, which may help get you back on the road faster.
Insurance for Lyft drivers
Lyft offers insurance to its drivers while they’re on the road. This insurance protects drivers from being held liable for bodily injury and property damage caused to others or their property in a covered incident.
Types of insurances available for rideshare drivers
|How it covers drivers||Uber||Lyft||Extra insurance|
|Offline||The personal insurance company and coverages you selected will apply.||Your standard car insurance coverage usually applies. If you used Express Drive to rent a vehicle, basic insurance is included in the cost.|
Here are some options available for rideshare drivers.
Umbrella insurance: Excess liability coverage, often known as over-limit coverage, covers you if your ordinary insurance policy does not cover legal responsibility costs.
Liability coverage: If you are responsible for an accident, you might have to use liability insurance. This type of insurance can help you pay for the other person’s losses, such as damage to their car or personal injuries.
Comprehensive coverage: This coverage can help you pay for your automobile damage if an unexpected occurrence, such as fire, theft, vandalism, or severe weather destroys it.
Medical payments coverage: If you get hurt in an accident, this coverage can help pay for your personal medical costs. It may also help you if you lose income while you are recovering.
|Available/waiting for a ride request|
Uber will provide you with automobile liability insurance if your insurance does not cover at least this amount:
Lyft makes sure that you’re covered in case of an accident by offering third-party liability insurance that pays out at least:
The policy does not apply to covered accidents that occur in Arizona and Nebraska, where third-party liability insurance for bodily injury is $25,000 per person, $20,000 per accident for property damage, and $50,000 per accident, as required by state law.
In the event of an accident, Uber has the following auto insurance:
Lyft offers at least $1,000,000 in third-party auto liability coverage for accidents.
Lyft’s first-party coverages may include uninsured motorist coverage, underinsured motorist coverage, PIP, MedPay, and/or Occupational Accident coverage.
If a driver obtains comprehensive and collision coverage on their auto policy, Lyft will maintain contingent comprehensive & collision coverage up to the actual cash value of the car with a $2,500 deductible.
Rideshare Insurance Mistake #3: Accepting “No” From Your Auto Insurance Provider
You want to tell your insurance company the truth–that you’re a rideshare driver. But then, you’re surprised when they say one of two things:
- “Sorry, we don’t offer rideshare insurance policies.”
- “Sure thing. You’ll need to buy one of our commercial auto policies to be properly insured.”
The reality is that many auto insurance companies are behind the times, but some don’t want to take on the increased risk.
Don’t be fooled if your auto insurance provider tells you that you need to buy a commercial policy – these are much more expensive. The monthly premiums for a commercial policy may take away from your rideshare revenue, so be careful when choosing your insurance. Even if you have a rideshare business, it doesn’t mean that you need to get a policy with high premiums.
Rideshare Insurance Mistake #4: Treating Your Business Like a Hobby
Though you may have one or even two other jobs, as a rideshare driver, you are simultaneously running your own part-time business.
An LLC is necessary for any company, including rideshare drivers. Why? It provides an extra layer of defense against litigation, claims, and your earnings. It also makes filing taxes easier if you form an LLC. The IRS prefers that you separate your company costs from your personal earnings.
Setting up an LLC for your rideshare service is quite quick and simple. You’ll see benefits in your auto insurance coverage as soon as you do.
Is Umbrella Insurance Worth It For Rideshare Drivers?
Umbrella insurance is useful for drivers who want to protect themselves against unforeseen expenses related to their vehicle. Rideshare operators, commuters, and carpoolers are the people that benefit most from it.
Rideshare companies commonly give a limited insurance policy to their employee drivers, but this coverage is often insufficient. The main reason you’ll put yourself in danger is that your company’s insurance probably only covers you part of the time. If you’re thinking about ditching your car in favor of a rideshare service, know that you will still need insurance. Your company-provided coverage won’t cover you before or after a ride.
How To Decide If You Need Umbrella Insurance
When deciding whether or how much umbrella insurance to get, consider if you want extra liability protection in case of an accident.
In nearly every state in America, you are required to have minimum liability car insurance to legally drive on the road. However, in many states, these coverage limits are shockingly low. They’re so minuscule that your car insurance will not cover numerous types of accidents.
If you’re looking for extra protection, an umbrella policy might be right for you. These policies, which can be obtained from most insurance companies, offer at least $1 million in coverage on top of your regular insurance policy. If you live in the United States, most of the major insurance companies offer $5 million in umbrella insurance coverage.
Protect Your Rideshare Business
Insurance companies are designed to manage risk. As a rideshare driver, you must understand that you fall into a high-risk category. The odds of getting into an accident, having bodily injuries, and getting sued are higher than your average driver.
Before you get back behind the wheel, get insurance to protect yourself and your passengers. When it comes to auto insurance, there is no such thing as being too safe. Your livelihood depends on it.
Rideshare drivers across the nation are forgetting about one important piece to this great opportunity. Rideshare insurance.
That’s right. In a recent poll of 1,000 rideshare drivers, a full 77% did not have adequate insurance. Perhaps even you.
In other words, with every pickup, you’re putting your money at SERIOUS risk.
Let’s take a closer look at these 4 insurance mistakes. With each one, ask yourself if you are putting yourself at risk.
Rideshare Insurance Mistake #1: LYING to Your Insurance Provider
Did you know that you’re supposed to let your auto insurance provider know whenever there’s a significant change involving your vehicles or your driving habits.
Like when you get a new car. Or if you have an accident. Or if your teenager turns 16 and is ready to terrorize the city on wheels.
Turning your car into a job also qualifies.
Think about it: You’re exponentially increasing the number of miles you drive. Which means you’re significantly increasing your risk for an accident.
Not to mention, you’re carrying precious cargo — Other people!
So, by failing to mention to your insurance carrier that you drive for Lyft or Uber, you are essentially lying.
It’s akin to not disclosing your history of heart problems to your health insurance provider.
“But everybody ‘forgets’ to tell their auto insurance provider, right?”
Yes, many do. Which may be a short-term win. Unfortunately, if you have an accident (and remember, your odds of an accident while being a rideshare driver just shot up) three things may happen.
First, you may have to pay a major chunk of that bill. That’s money for the repairs, money for injuries and any traffic citations, of course.
Second, your rates may climb significantly.
Third, your insurance carrier is likely to DROP you.
(Just like your significant other might drop you if you lied to him or her)
So, let’s be honest from the start.
Talk with your auto insurance provider about options for rideshare coverage.
Or you’re welcome to speak with us. Takes just minutes. And our rideshare coverage plans are surprisingly affordable.
On to mistake #2…
Rideshare Insurance Mistake #2: Assuming Uber or Lyft Has Your Back
You might be thinking…
“But my rideshare company ensured me I was covered through THEM. What gives?”
Yes you ARE covered. Somewhat.
But, you’re still exposing yourself to significant risk. (And by risk, I mean money, debt… you get the ugly picture).
It’s a little complicated. But we’re here to simplify it.
There are 3 different periods of rideshare insurance. Think of periods as “phases” as a rideshare driver.
Period 1 — Online and WITHOUT a ride request. You’re just cruising around with nobody in the car and no pickup requests.
Period 2 — Online and WITH a ride request. You could be en route to a rider or even parked and waiting for a rider.
Period 3 — Online with a RIDER in your car. Woo-hoo, You’re making money!
Here’s the problem. Uber and Lyft’s rideshare insurance only covers drivers during Periods 2 and 3…
But they leave you high and dry throughout Period 1!
If you get into any type of accident during Period 1, you may end up paying through the teeth. Seriously.
You won’t have any collision coverage from your rideshare company. Plus, your personal insurer likely won’t cover you either. (Especially if you “lied” to them and didn’t tell them you were a rideshare driver).
And it can add up fast! Repairs. Injuries. Even lawsuits.
Suddenly your side hustle is looking more like a side nuisance.
Don’t worry. While Uber or Lyft might not have your back, we will. Ask us about adding a simple policy to help protect you throughout Period 1… and anytime you’re working your side gig.
Now let’s tackle mistake #3…
Rideshare Insurance Mistake #3: Accepting “NO” From Your Auto Insurance Provider
So, you’re ready to come clean and march down to your insurance company and tell them you are a rideshare driver.
But, to your shock, they tell you one of two things:
One, they say, “Sorry, we don’t offer rideshare insurance policies.”
Or two, “Sure thing. You’ll need to buy one of our commercial auto policy to be properly insured.”
Are you kidding! You just laid your soul on their desk and told the truth because you wanted to protect your wallet. You did what’s right… and they feed you these lines?
Fact is, there are still MANY auto insurance providers that are behind the times.
(Remember, Uber started in 2009) But some insurance companies don’t want to deal with the increased risk.
At Signature Insurance, we see it differently. Because it’s your job, you’re more likely to drive safely and responsibly.
That’s why we proudly carry rideshare insurance policy options. Plus, you’ll find our policies to be very competitive. Very affordable.
Also, don’t fall for it if your current auto insurance provider requires you to purchase a commercial policy. That should send shivers down your spine.
Commercial policies are very costly. So much so that the premiums may eat into your rideshare revenue.
We don’t play those games. We use common sense.
Just because you have a rideshare business doesn’t mean you belong in a high-premium commercial policy.
Therefore, we will go out of our way to find you the policy that provides the coverage you need at a reasonable rate.
Now for our final often-made rideshare mistake…
Rideshare Insurance Mistake #4: Treating Your Business Like a Hobby
You may have a full time job. You may have another part-time job.
But make no mistake, as a rideshare driver, you are a BUSINESS. You’re not simply a driver delivering pizzas for Pizza Hut or Papa John’s.
You’re running your own part-time business.
And any business — including rideshare drivers — should be set up as an LLC.
Why? It’s an added layer of protection.
Protection against lawsuits. Protection against insurance claims. Protection for your personal income.
By becoming an LLC, it’s also a big help at tax time. It helps keep your business expenses and personal income separate.
It’s pretty quick and easy to set up an LLC for your rideshare business. The minute you do, you may see advantages in your auto insurance coverage.
Conclusion: Protect Your Business. Protect Your Bank Account.
Insurance companies are designed to manage risk.
If you’re self-employed and work from home, there’s much less risk of an accident.
If you’re commuting daily for an hour or two in aggressive, bumper-to-bumper traffic, you assume a greater risk.
As a rideshare driver, you must understand that you fall into a high-risk category. The odds of getting into an accident, having bodily injuries and getting sued is probably 5 – 10X higher than your average driver.
Most rideshare drivers would rather ignore insurance matters and focus on getting more riders and getting more money.
Everyone likes to ignore insurance… until they need it.
Because the second that driver nails you at an intersection, it’s one of the first things that crosses your mind.
Hey, we’re here to help. We’ve helped many rideshare drivers protect their families, their business and their assets by providing better coverage.
Now they’re able to focus on earning more and worrying less.
Uber’s motto is “Evolving the way the world moves.”
We just want to help you and all of your riders to move without unnecessary risks.
Just as you can help us out by driving us to a concert, dinner or the airport…
Let us help you out by giving you the peace of mind and confidence that you’re 100% covered every time you get behind that wheel.
If you or someone you know drives for Uber or Lyft, you’re welcome to call us for a free review of your policy. We’ll be honest and let you know if you’re good-to-go or if you need a bit more coverage for your rideshare business.
Get insurance today!
At Signature Insurance we want to help you understand your insurance coverage options so you make the best decision.
Contact us at (586) 274-9600 and we’ll be happy to get quote for you from many of the top auto insurance companies or home insurance companies in Metro Detroit.