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Uber Insurance Explained

By Posted : April 7, 2020

There are millions of Uber drivers across the U.S. who use the service to generate full-time or part-time income. Drivers are essentially operating their own small business. So, that means they need insurance to protect their business and reduce their financial liability.

Uber offers its own "Driver-Partner Insurance.” However, this insurance comes with several coverage gaps. Here's what you need to know about Uber insurance.

Ridesharing and insurance

If you want to become a rideshare driver, you'll need to either have a commercial auto insurance policy or a personal auto insurance policy that offers rideshare coverage as an endorsement.

As a rideshare driver, you should know that Uber's insurance policy doesn't cover you when the app is closed. During these times, your personal auto policy provides coverage.

When the app is open, Uber's insurance provides liability coverage at certain points during your trip. Your own personal rideshare-friendly policy will provide coverage during other phases of the trip, depending on what's outlined in the policy.

This is all dictated by the three main coverage periods insurers use to separate a rideshare trip:

●  Period 1: The Uber app is on, but you're waiting for a ride request.

●  Period 2: You've accepted a ride request and are on your way to pick up a passenger.

●  Period 3: The passenger is in your car. This period ends when the passenger exits the car.

If you get into an accident while working for Uber, you need to know whether your personal policy or Uber's policy will provide coverage during each specific period, so that your claim isn't delayed or denied.

What Uber insurance covers

Uber's Driver-Partner Insurance provides different levels of coverage across Periods 1, 2 and 3. Coverage varies significantly depending on whether a passenger is in your car.

Here's a breakdown:

Insurance coverage during Period 1

Uber's liability limits are relatively low during Period 1. The company doesn't offer comprehensive and collision coverage during this phase of the trip.

Liability: Uber only offers liability coverage of $50,000 per person bodily injury, up to $100,000 per incident and $25,000 of property damage coverage during Period 1. It doesn’t provide comprehensive and collision coverage during this phase of the trip.

Insurance coverage during Periods 2 and 3

Your liability is well-covered, but collision and comprehensive coverage come with certain caveats.

Liability: If you get into a covered accident on your way to pick up passengers or while transporting them, Uber offers $1 million in third-party liability coverage.

Uninsured/underinsured motorist: Uber has uninsured/underinsured motorist bodily injury coverage that covers injuries to you and your passengers if you get into a covered accident and the other driver is at fault and is uninsured or underinsured.

Collision and comprehensive: Uber offers comprehensive and collision insurance that will cover up to your car’s cash value. However, this coverage is contingent and comes with a $1,000 deductible. The deductible means you'll have to pay $1,000 out-of-pocket before Uber's coverage kicks in to cover your claim.

Uber's coverage levels, especially for liability, can leave coverage gaps that increase your out-of-pocket costs. That’s especially true if your car is damaged or totaled or if you and other passengers are injured and have medical expenses.

For liability coverage, most insurance experts recommend $100,000 of bodily injury coverage per person, $300,000 of bodily injury coverage per accident and $100,000 of property damage coverage. Uber insurance coverage is significantly below these thresholds.

Penny Gusner, senior consumer analyst with Insurance.com, says drivers also should read the fine print when it comes to Uber's comprehensive and collision coverage.

"Reading the details of Uber's insurance, it says that, 'as long as you maintain comprehensive and collision coverage on your personal auto insurance, Uber maintains insurance on your behalf that will kick in to provide protection for physical damage…' Thus, Uber itself is saying, you need to have physical protection on your car with your own policy in order for us to also provide that coverage during the appropriate times for your vehicle," Gusner says.

What your personal insurance covers

Regardless of what insurance Uber offers, every driver should have some form of personal insurance coverage, whether it's a liability or comprehensive policy.

However, if you're a rideshare driver, you should know that your personal auto policy only covers your vehicle’s personal use. If you're driving your car for business, you'll need a commercial policy.

"Traditional car insurance is not set up for the liability and medical payments exposure, and the liability a driver exposes himself or herself to while getting paid to transport individuals," says Ben Galbreath, a producer with Wallace & Turner, an independent insurance agency in Springfield, OH.

Personal car insurance policies all have a clause that excludes explicitly commercial activities like ridesharing. Legally, your insurer can deny any claim if you drive for Uber and get into an accident.

"The risk is more than insurance companies want to take on when a person is driving for commercial reasons, such as driving a person for money," Gusner says. "A person that drives others is on the road more, driving unfamiliar routes, is driving with strangers and all of this is a risk that a personal auto policy is not meant to take on. For that reason, insurance companies offer commercial policies for rideshare drivers or riders and endorsements, which drivers can pay extra for the extra coverage they need."

 Insurance levels for rideshare drivers

There are three main types of insurance every driver should consider. Rideshare drivers, in particular, should maintain comprehensive and collision coverage.

● Liability: Liability insurance is mandatory in every state. It covers injuries to another person or damage to their property due to an accident in which you're at fault. Liability insurance will never cover your own car or your own injuries. Some states have low limits that may not be enough to cover damage or injuries to other drivers should you get into an accident. This means you'll have to pay out-of-pocket to fill the gap, so you may want to purchase additional liability coverage.

● Collision/comprehensive: These coverages are not mandatory in every state. However, if you have an auto loan on your car, your lender typically requires this coverage. Collision coverage will pay to repair or replace your vehicle if it is damaged in an accident with another vehicle or stationary object. A comprehensive policy covers car damage that isn't related to an accident, such as hail or fire damage or vandalism. Resist the temptation to skip this coverage unless you're prepared to write a check for another vehicle.

● Uninsured/underinsured motorist: Some states require this coverage. If you're involved in an accident and the other driver is at fault but doesn't have car insurance, uninsured motorist insurance covers your injury-related medical expenses and those of your passengers. It also can cover your lost wages, pain and suffering. If the driver who hit you has insurance with low coverage limits, underinsured coverage will cover the difference. For this type of coverage, you should choose coverage amounts that match your own liability limits.

Rideshare drivers should also have rideshare insurance. That coverage can come through an endorsement added to their personal auto policy or via a separate commercial policy.

“Rideshare insurance is the best option for drivers since it covers them during the period 1 gap (app on, no passenger yet) and the companies won't drop drivers from the policy like they would if you had a personal policy and signed up for Uber/Lyft,” says Harry Campbell, owner and founder of The Ride Share Guy blog and podcast. 

Galbreath says rideshare drivers should consider their personal assets, such as home, car, bank accounts and investments when thinking about coverage.

"Auto claims have high bodily injury payouts, so medical bills and liability payment could bankrupt individuals if the right type of coverage isn't purchased," he adds.

Galbreath says if you're looking for coverage, you should take the time to compare policies and that you shouldn't base your decision on price alone.

"My advice would be to look into coverage options and pay for what you need to be protected based on your personal liability," he says. "The cost of insurance would not come close to the potential loss a driver could risk personally or professionally."

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