How Does Ride-Share Insurance Work?

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With the prospect of using their personal car for profit and working their own hours, many people are joining ride-share services. This allows people to use their personal cars for business by picking up and dropping off passengers. While these companies have certain requirements, such as having any minor issues fixed on the cars and having them always clean, there is one issue that is more difficult to understand: how does ride-share insurance work? Basically, your personal insurance covers you while you are not using your car for work. While providing ride-share services, the ride-share company will provide you with coverage.

Ride-share insurance fills the gaps between your personal insurance and the insurance provided by the ride-share company. In some cases, the ride-share company’s insurance may hold sole liability for payouts after an accident. Ride-share services, such as Uber and Lyft, have gained popularity among commuters and contractors alike due to their convenience.

Understanding Auto Insurance

There are some terms to understand about auto insurance to help with understanding when ride-share insurance is discussed.

Auto insurance comes in two basic types:

Personal auto insurance policies cover your car when you use it for personal purposes. These are things like running errands to the store, driving children to and from school, or driving to and from your job.

Business or commercial auto insurance policies cover vehicles while they are getting used for business purposes. Examples may include delivery or cargo trucks, or company cars used by salespeople.

When taking out an auto insurance policy, the type of policy you need will depend on whether you are using the vehicle for personal or work purposes.

Every insurance policy has limits. This is the highest amount that your insurance company will pay you for a particular claim. You may have a homeowners’ insurance policy with a $100,000 limit. If you suffer damage to your home by a fire, and repair costs total $120,000, your insurance will pay an amount up to the policy limit. So, your insurance will compensate you $100,000, and you will have to cover the other $20,000 yourself.

Insurance policies also have deductibles. This is an amount that you must pay before your insurance plan will start to pay. For example, if you have an auto insurance plan with a $2,000 deductible, and you are in an accident that causes damage worth $4,500 to your vehicle, you will have to pay the first $2,000, and thereafter your insurance policy will cover the remaining $2,500.

Auto insurance provides a range of coverages. These include

  • Liability coverage. If you are at fault as a driver in an accident causing bodily injury or property damage to others, liability coverage will protect you. This is a type of third-party insurance, meaning it will compensate other people who suffer damages because of your fault, but will not cover your damages.  Liability coverage will pay for injuries and property damage that you have caused to the other driver, up to your coverage limits, but will not cover the injuries or property damage that you have suffered.
  • Comprehensive and Collision coverage. This type of coverage repairs or replaces your car if you are in an accident. It does not matter who is at fault for causing the accident. Comprehensive coverage will also cover your vehicle for events other than a collision, such as a fire. The insurance company will again only compensate up to your policy limits.
  • Uninsured motorist (UM) and underinsured motorist (UIM) coverage. This protects you if another driver is at fault in an accident, and either does not have insurance, or his or her policy limits are not sufficient to compensate you for your injuries or damages. Your insurance will compensate you in such a situation.

Third-party coverage is where your insurance covers other people who suffer injuries or some form of damages due to an accident caused by you, meaning you were at fault. In third-party coverage, the other parties make claim against your insurance.

First-party coverage is where you are covered by your own insurance policy. It can be to cover your damages if you were at fault, including uninsured and underinsured motorist coverage. If you have comprehensive coverage, your insurance company may compensate you directly even if the other driver was at fault.

What Is Ride-Share Insurance?

When you agree to your personal insurance policy, you may be promising your insurance company that you are only using your vehicle for personal use. Therefore, if you use it for commercial use and fail to disclose this to your insurance company, you may be violating their terms, and thus breaching your policy. This will give the insurance company the option to cancel or refuse to renew your policy. If you are driving for a ride-share company, you should inform your insurer.

To cover these gaps in your personal policy, your insurance company may offer ride-share coverage. This is an add-on to your existing personal policy to cover you while you are working for a ride-share company. Uber offers insurance even when you have ride-share insurance, but the ride-share add-on is your primary policy, and Uber’s insurance is contingent coverage. This means you must claim from your policy before you can make a claim from Uber.

Uber’s insurance only covers you for a first-party claim in stages 2 and 3. For stage 1, Uber’s insurance is only for third-party claims. Its coverages for third-party claims are also low, so even if you make a claim, you may still find yourself liable for damages to other drivers if their damages exceed Uber’s compensation.

Ride-share insurance is a good investment, because it covers you for these gaps and shortcomings in only having a personal policy and Uber’s insurance. It also saves you the risk of having your insurance policy canceled or not renewed for using your car for business purposes.

How Does Ride-Share Insurance Work?

Your personal insurance policy does not cover you while using your car for commercial purposes. Therefore, if you are a ride-share driver, it will not cover you while you are providing ride-share services, creating gaps in your coverage where your coverage lapses while providing these services.

To understand Uber’s insurance coverage, you will need to understand the different stages the coverage is separated into.

You may be offline and not using the app at all. In this case, you are covered by your personal insurance, as long as you are not using the app. Examining the following stages helps you determine who is liable for the damages resulting from a ride-share accident.

Stage 1 – This is when you have the Uber app on and are waiting for a ride request. You could be driving around or waiting in a parking lot. At this stage, your personal policy will not cover you, but Uber’s insurance coverage begins. Uber’s coverage at this stage is third-party liability coverage, meaning it only pays for other parties who suffer injuries or property damage. It will not compensate you for your own injuries or vehicle damage.

At stage 1, Uber’s coverage is $50,000 per person for bodily injury caused in an accident. This is the coverage limit, so $50,000 is the most compensation each injured person can receive. The total limit per accident is $100,000 for bodily injury, meaning no matter how many people were hurt, and the extent of their injuries, Uber will only pay out this amount per accident for bodily injuries. For property damage, coverage is $25,000 per accident.

Uber’s coverage is contingent upon you claiming from your own insurance first. Before Uber pays, you will need to file a claim with your own insurance company. What happens when you make a claim depends on whether you have a ride-share endorsement. This will be discussed in more detail later, but it is an addition to your own personal insurance policy that covers you while you are providing ride-share services in your car.

If you do not have a ride-share endorsement, your personal insurance company will deny the claim, since you are using the car for commercial purposes. Your insurance will likely be canceled because you are breaching your policy by using your vehicle for commercial purposes when your policy is for personal use. However, Uber’s insurance will then compensate you. If the damages are higher than Uber’s insurance limits, the other person may sue you for the shortfall.

If you do have a ride-share endorsement, your insurance company will provide compensation up to the limits of your policy. When the other person’s damages are greater than your policy limits, Uber’s insurance will cover this shortfall. Since Uber’s coverage is only third-party liability coverage, you will not be able to claim your own medical bills or property damage.

Stages 2 and 3 – Stage 2 is where you have received a request and are on your way to collect the customer. Stage 3 is when the customer has entered your car, and you are transporting him or her to the destination.

In these stages, Uber provides $1,000,000 in third-party liability insurance. It will cover personal injuries and damages suffered by passengers, or others who have been injured or who suffered damages in an accident caused by you as the driver. Because it is third-party liability coverage, this will not apply to any damages you suffer.

Uber also provides comprehensive collision coverage at the coverage limits determined by your state. In Nevada, drivers are mandated to have minimum insurance coverage of $25,000 for bodily injury for each person injured, with a $50,000 limit for bodily injury coverage per accident and $20,000 for property damage per accident. Therefore, Uber provides these same limits for uninsured, underinsured, and first-party injury coverage to you in Nevada. Injured Uber drivers can claim compensation using this insurance coverage. It will also provide coverage for the repair or replacement of your vehicle to its actual cash value, subject to a $2,500 deductible.

In these stages, the coverage is contingent upon you claiming from your own insurance company first.

If you do not have a ride-share endorsement, the situation will be the same as in stage 1. If you do have ride-share insurance, and have suffered damage to your vehicle above your coverage limits, your insurance will compensate you for damage to your vehicle, up to your coverage limits. When the value of your vehicle and damages are higher than your coverage limits, Uber’s insurance will compensate you for the damages that exceed your limits, subject to the $2,500 deductible.

Do Ride-Share Drivers Have to Purchase Commercial Car Insurance?

Commercial insurance could be an alternative to ride-share insurance. It covers vehicles that are used for business purposes, and can cover anything from ride-share vehicles to truckers and company vehicles. Commercial insurance is liability coverage. If you have ride-share insurance, it will cover everything that your commercial insurance would cover, meaning that commercial insurance is not essential. Ride-share insurance is preferable because it has

  • Lower deductibles
  • It is a new or add-on to your policy. This gives you more control and flexibility in your policy.
  • Full coverage. You can add comprehensive and collision coverage in addition to liability coverage.
  • Lower cost than commercial insurance.

Driver-Partner Insurance Policies

A ride-sharing driver must set up an account with the company by passing checks, registering his or her vehicle, and setting up an account where all the weekly fares are deposited. Uber refers to drivers as “partners”. A driver-partner is a person who owns a vehicle, registers it with the ride-sharing company, and is responsible for risks of profit or loss with the vehicle. This partner can sub-hire another driver to drive his or her registered car, and provide ride-sharing services. The insurance policies that ride-sharing companies provide for their partners are driver-partner insurance policies.

If you have been in a ride-share accident, Uber and Lyft accident attorneys in Nevada will help you figure out what to do if you are injured in a ride-share accident.