How insurance works with ridesharing

woman driving for ridesharing company

Ridesharing has become a huge industry in recent years, with 93 million people using Uber on a monthly basis in the last quarter of 2020. But how does it work with insurance? If you drive for a rideshare company, you may already know that your personal car insurance policy typically does not cover business use of your vehicle. Most rideshare and delivery services are required by state law to provide insurance for their drivers, but if you plan to use your vehicle for personal and business purposes, you might need to consider additional insurance coverage options.

In this blog post, we’re going to cover how insurance works with ridesharing and delivery service companies and who’s responsible for damages if you’re driving for a rideshare company or food delivery service. If you’ve been thinking about ridesharing or driving for a food delivery service, this post will serve as your guide to navigating rideshare and delivery auto insurance.

So, what are ridesharing and food delivery services?

Ridesharing is defined as participating in an arrangement in which a passenger travels in a privately owned vehicle for a fee, typically arranged by means of an app or website. Food delivery service is a courier service in which a restaurant, store, or independent food delivery company delivers food to a customer. As with ridesharing, customers typically place their orders through an app or website.

So to summarize, anytime you use your vehicle to drive passengers or deliver goods or services for a fee, you’re engaging in ridesharing.

According to most rideshare and delivery companies, their drivers are not considered employees but rather independent contractors. For this reason, companies do not have to offer as many benefits to contractors as they do employees, and companies are less likely to be legally responsible for negligence of its contractors in comparison to its employees.

How does auto insurance work with ridesharing and delivery services?

Insurance companies extend coverage based on their assessment of the risk of an accident or claim. So, the higher the risk, the higher your premium. When a vehicle is used for personal use, the risk of a claim or accident is lower than when the vehicle is used to make money. This is because you’re likely to put more miles on a vehicle and spend more hours on the road when driving for work, increasing your chances of an accident.

When someone needs to drive to make money, auto insurers typically recommend commercial policies rather than a personal policy. But because of the typically high premiums, rideshare and delivery drivers are less likely to buy such coverage. So, how do rideshare or delivery drivers insure themselves, their property, and their passengers?

Insurance through the app companies

Insurance through the ridesharing company only covers certain periods of the drive, like when the driver is on their way to get a passenger and when the passenger is in the car. But if your app is closed, you are not considered to be in driver mode. In the world of ridesharing or delivery and insurance, a driver’s time is divided into three periods. Insurance coverage differs depending on when the accident occurs, as explained below.

  • Period 0: The app is closed and not in use by the driver.
  • Period 1: The driver has the app open and is driving around and waiting for a passenger to request a ride.
  • Period 2: The driver has been matched with a passenger and is on the way to pick the rider up.
  • Period 3: The rider is in the car with the driver and the period ends when the passenger gets out.

Ridesharing insurance or endorsements

Some insurance providers offer ridesharing insurance or endorsements. A ridesharing endorsement, which covers liability and property damage to the driver’s car, can be added to some personal insurance policies. Rideshare endorsements or rideshare insurance is typically less expensive than commercial coverage but is not available in every state. And unfortunately, endorsements don’t cover the driver during all periods. For example, some rideshare insurance policies only cover drivers during Period 1, when the driver has the app open and is driving around and waiting for a passenger to request a ride. That means that without an endorsement, even if the driver is just hanging around and waiting for a passenger to match, the driver’s personal insurance carrier will consider them to be engaged in commercial activity and will not cover the driver.

If something happens during a ride, who covers the damages?

It has been said time and time again: accidents happen (even during rideshare and deliveries). If a driver has a commercial insurance policy or personal car insurance policy with an endorsement, then the driver’s car insurance will apply to the passenger’s injuries.

Unfortunately, not all ridesharing or delivery drivers have a commercial policy or a personal car insurance policy with an endorsement that will cover passenger injuries. And many personal auto insurance policies have a “business use exception” meaning the policy won’t cover injuries or damages that occur while the insured driver is driving for profit.

In this scenario, the ridesharing company or delivery service’s insurance kicks-in after the driver’s own insurance has been exhausted (as long as the driver has insurance coverage). Many rideshare or delivery service companies carry third party liability insurance coverage, which will pay up to $1 million in personal injuries or property damage fees. A passenger is covered under this policy if the rideshare driver is at fault for the accident.

When the rideshare driver is not at fault for the accident, then the passenger would have to seek a personal injury lawsuit. If all of the insurance policies do not fully compensate the passenger or the insurance companies refuse to pay out, the passenger can then try going after the rideshare company itself.

What does Elephant have to offer rideshare and delivery drivers?

At Elephant, we offer app-based ridesharing insurance in seven states: Georgia, Illinois, Indiana, Maryland, Ohio, Tennessee, and Virginia. At this time, we do not offer app-based ridesharing insurance in Texas.

Elephant is also able to offer ridesharing endorsement in the same seven states (again, excluding Texas). Elephant will provide coverage to a customer when they are using their vehicle for personal use and while they are getting ready to drive for rideshare or delivery up until the time they accept a ride or delivery. Once a customer accepts a ride or delivery, the rideshare or delivery company’s commercial policy will provide the coverage. And, if a customer is delivering for the company making the food (like a Domino’s driver delivering Domino’s pizza), then it does not qualify as an app-based delivery.

If you’re looking for rideshare or delivery service insurance but aren’t sure what kind of coverage you need in your state, you’re not alone. Figuring out the coverage that’s best for you and offers you the best protection can be overwhelming, but that’s why Elephant is here to help you through the process. With just a few questions about your individual needs, we can help provide a recommendation to get you ridesharing or delivering with the coverage that’s right for you.

Get a quote today and let us help you get the car insurance coverage you need!

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