Just a few short years ago, it was unthinkable that a private car owner could use their vehicle like a taxicab to pick up passengers for hire. Today, ride share programs such as Uber and Lyft have become wildly popular. As this new industry emerged, private auto insurance companies began to express great

concern about the fact that their policies were not intended to cover private cars used in this capacity. The major ride share companies have since developed a resolution for the personal car for hire business model, but many drivers who use their cars for these activities still don’t fully understand how to handle the question of insurance.

Commercial Automobile Use & Private Insurance

It has been a standard practice over the years for nearly all insurance companies covering private passenger cars that insurance be absolutely excluded for vehicles being used in commercial (for hire) activities. Historically, if an insurance carrier who agreed to cover a private automobile found out that the car was being used in a “for hire” capacity, coverage would be cancelled in nearly every case.

In the early days of ride share programs such as Uber and Lyft, many well-meaning drivers mistakenly believed that their private auto insurance was sufficient to cover them while using their cars for hire. Many drivers who had accidents while working were shocked to learn that their private insurance carrier would wind up denying any claims that occurred while operating as a commercial vehicle. Many people were so focused on making money with their own cars through ride share programs, they forgot to check with their insurance agents to see how their private auto policy would cover them.

Changes In The Ride Share Industry

As the ride share industry began to explode in popularity, the issue of auto insurance coverage became a much more prevalent problem for drivers. People who used their cars for hire were learning that not only couldn’t they rely on their private insurance to protect them, they were also unable to qualify for a commercial auto policy.

It didn’t take long for the major ride share companies to respond to this urgent problem and eventually they developed their own insurance coverage model that would resolve the coverage gap issue. Today’s auto insurance program for ride share drivers is based on an “on/off” design. Let’s take a look at how Uber, the largest ride share company approaches driver insurance with the use of their phone app.

The Rideshare Insurance Process

When a driver signs on to the Uber app for the day, they have access to the Uber insurance coverage. During the time that a driver is online, ready to work but has not accepted any trip requests, they are covered only under Uber’s liability policy. Liability insurance covers the driver in case they injure other people or their property. They driver must also be at fault.

Once a driver has accepted a trip, is in-route and during the trip, Uber will cover the driver for liability insurance, uninsured/under-insured coverage and also collision/comprehensive damage to the driver’s car (assuming the car is insured for collision/comprehensive on the driver’s private policy). While the insurance programs developed by the major ride share companies have largely solved many coverage issues, it is best for drivers to also consult with their private insurance agents to see how their policies will interact with the ride share coverage.

Ride share companies like Uber or Lyft are immensely popular and it appears that they will be around for a long time. Drivers who use their own cars to transport passengers for compensation do earn money and the industry has helped many drivers from a financial perspective. However, the liability risk of operating such a business far exceeds any possible pay one might receive. Therefore, it is extremely important that drivers understand how auto insurance works in this industry.

Contact Insure on the Spot Today!

Knowing how auto insurance works in his evolving business will play a critical role in every driver’s success. With the established popularity of ride share programs around the world. Drivers must remain insured and safe. Not to worry Insure on the Spot has your back. For more information, please do not hesitate to call. Or to receive a FREE quote in just 2 minutes, fill out our form on the website to get started. We also, provide top notch comprehensive auto and SR22 Insurance across Chicagoland.