Ridesharing companies like Uber and Lyft are in the business of connecting drivers looking to make money with passengers looking for a ride. But earning income as a driver for these platforms requires an investment in time and money. And this arrangement involves an employment contract and has insurance, legal, and safety implications for the driver. If the driver is implicated in liability issues or their car suffers some damage, they could find themselves in the red even after they've ferried dozens of passengers.
With that in mind, here are 7 ways you can protect your livelihood as a rideshare driver.
1. Understand What’s At Stake
Uber and Lyft make it sound like earning money through their apps is a quick and simple process. Both companies require a background check and a clean driving record, along with an in-state license, in-state registration, and in-state insurance. Once approved, you log into their app and wait for a passenger.
If only it were really that straightforward. Many drivers don't understand the many implications for working through these platforms. First and foremost among the misconceptions is the assumption that, as a driver, you are an employee of the company. In fact, you are an independent contractor. That's an important distinction because it means the company will not automatically protect you or your vehicle. You'll need to get your own protection.
2. Review Rideshare Insurance Policies
Yes, Uber and Lyft offer insurance; however, it’s confusing and doesn’t cover everything. While it might seem like a decent policy when you give it a quick review, it's easy to find yourself with a coverage gap.
One important thing to keep in mind is that the kind of coverage you get from these policies depends on what you're doing with your vehicle. When you log into the app and wait for rideshare requests (Period 1), both Uber and Lyt offer $50,000 coverage per injury for passengers, with a total maximum claim of $100,000. They also offer $25,000 property damage coverage.
Things are different once you accept a request and drive to pick up the customer or have a passenger in the vehicle (Periods 2 and 3). In these cases, they provide up to $1 million per incident for bodily injury or property damage to passengers or third parties involved in the accident. They also provide up to $1 million for uninsured/underinsured motorist coverage to protect their passengers. For each company, there is a deductible: $1,000 for Uber and $2,500 for Lyft (learn about The Pros and Cons of Increasing Your Auto Deductible).
It's important to note that neither of these policies cover accidents that occur when a driver is in their vehicle but hasn't logged into the app yet. In those cases, your personal policy coverage is all the protection you'll have.
3. Don’t Dodge Your Insurer
Unfortunately, many drivers simply cross their fingers and hope they won't have an accident, or that their insurance company won't find out that they were working as a driver and pay their personal insurance policy claim. If that seems like a clever way to save some money, think again. Avoiding the additional costs involved in transporting passengers can have unforeseen, devastating consequences.
Typical personal automobile liability policies exclude coverage when a person conducts business with their vehicle. That means once you log onto the app, you're no longer protected.
Almost all insurance applications, moreover, include a warranty regarding "failure to disclose." If you misrepresent how many miles you drive as a contractor or don't even tell your insurer that you're transporting passengers, this is a violation of your coverage terms. Your insurer may then cancel your coverage, and you could have a hard time obtaining a new policy.
Does it happen? Yes, and it isn't always clear exactly how insurance companies discover these indiscretions, but they have serious consequences. If you find yourself in an accident, you could have to pay out of pocket for injuries and damages, lose your source of income, and jeopardize your future.
4. Explore New Options
Uber and Lyft state that their partners must maintain their own insurance policy following state and local laws. Not too long ago, the only alternative was commercial insurance, but this is slowly changing.
Today, many companies offer “Period 1 endorsements” for your existing insurance policy to fill the gap not covered by rideshare policies. Some companies also offer hybrid policies that blend personal and commercial coverage for people who sometimes use their personal vehicle for business purposes.
It's often possible to combine personal auto and rideshare insurance to get good coverage at a reasonable cost. So, do your research and ask your current insurer if they have any policies that would fit your needs (see Making Money Through a Ridesharing Service? Here's What You Need to Know About Your Insurance to learn more).
5. Don’t Rule Out Commercial Insurance
While some options are popping up, insurance for rideshare drivers is still new territory. If you can't find decent rideshare insurance in your state, you’ll need commercial insurance. It will provide you with good coverage on its own, so you won't need a separate, specialized rideshare policy.
Commercial insurance policies offer additional advantages. They have higher policy limits to cover legal fees and medical expenses, which can be very high. They also cover other people who work for you as employees to protect you from at-fault lawsuits. And they cover any equipment you have in the vehicle.
6. Protect Yourself
Rideshare drivers face the same risks as taxi drivers – and it can be a dangerous business.
According to OSHA, “taxi drivers are over 20 times more likely to be murdered on the job than other workers." The Bureau of Labor Statistics, moreover, found that 5.6 percent will sustain injuries on the job. Uber and Lyft's commercial policies, however, only cover passengers and third parties, unless they buy additional medical coverage.
As an independent contractor, you're not entitled to workers’ compensation benefits either. You'll need your own health insurance to pay medical bills if you’re injured while working (see An Intro to Workers' Compensation to learn more).
Uber began a voluntary insurance plan, but it's currently only available in Pennsylvania, South Carolina, West Virginia, Delaware, Illinois, Arizona, Oklahoma and Massachusetts. Regrettably, their policy only offers half of a driver’s average earnings per week, far less than the two-thirds workers’ compensation provides.
Drivers need good medical coverage, and rideshare policies may not provide it. Their coverage depends on their doctor’s discretion, not a State Board. And it does not provide coverage for permanent partial disability or claims for trauma or mental health issues. Drivers, moreover, relinquish their right to sue or to join a class action lawsuit.
7. Consider a Dash Cam
Many drivers rely on dash cams to protect themselves from unfounded lawsuits and to record the details inside the vehicle in case of an accident.
Uber states drivers may “install and use video cameras to record riders for purposes of safety,” while Lyft does not have a set policy. Be sure to check your local and state regulations before installing one. They may be prohibited, require you to post a notice informing riders that you are recording, or the riders may have to give you explicit consent.
Ridesharing is here to stay. It generated $11,790m in 2017 and it’s anticipated to grow to 72.4m by 2022. That makes it very attractive to anyone hoping to earn an income, but protecting your earnings and investment is critical. If you follow these seven tips, there's no reason you can't join the ranks of successful rideshare drivers.