PhotoUber has been much in the news lately, mostly because of alleged frat-rat antics in the executive suite. But less noted is the growing risk consumers face when they decide to pick up a few extra bucks by turning their personal car into a rideshare vehicle.

Uber, Lyft, and the other ride networks wax eloquent about the virtues of entrepreneurship, American ingenuity, and so forth but tend not to dwell on the insurance issue in their promotional blather. Insurance companies are beginning to fill the gap, issuing warnings to their customers and, in some cases, offering special coverage for rideshare drivers.

“If you are driving for a rideshare company with a personal auto insurance policy, you might be taking a huge risk,” said Othello Powell, Geico director of commercial lines. “Most personal auto policies were never designed to protect you or your vehicle for commercial purposes.”

A typical personal auto policy contains coverage gaps and limitations for ridesharing and package delivery. If an accident does happen with drivers’ personal auto policies, they have to provide their insurance carriers with specific details, including the phase of the ride they were in, said Geico in a statement.

Different phases

As Geico and other companies see it, a rideshare driver goes through many phases in a typical hour:

  • leaving home with the network app off;
  • cruising for passengers with the app on;
  • driving to meet a passenger or pick up a passenger;
  • transporting the passenger or package;
  • returning to cruising with the app on; and
  • finally, turning the app off and driving home or to some other personal destination.

Most personal policies can be counted on to cover the first and last phases -- when the driver is transporting himself and is not yet cruising for passengers. All of the others are questionable, and the driver may not be covered in the event of an accident during the other phases.

This could spell lifelong financial disaster if someone is seriously hurt or killed in an accident. 

For example: Was the app on or off? Was the vehicle carrying any passengers or packages? Depending on the answers, drivers may not have the coverage they thought they had, Geico said.

Supplemental coverage

The easiest, though perhaps not the cleanest, solution is to purchase coverage from Uber, Lyft, or whatever. Uber offers a policy that provides $1 million liability coverage from the time a driver picks up a passenger and the time the passenger gets out. It also offers liability coverage up to $100,000 for the period between trips -- when no passenger is in the car. Lyft has similar plans

Geico and other major companies including State Farm have been rolling out rideshare insurance on a state-by-state basis, as outlined in this FAQ on the Geico site. Geico says its policies are now available in 36 states and the District of Columbia. 

As with any insurance, rates vary from one state to another and depend on your driving record, where you live, and other factors, so to comparison-shop effectively, you'll need to visit several company sites and gather quotes from each. 

It's important to note that these commercial policies are supplemental -- you must still have your own personal policy to cover you when you are not driving commercially. 

Additional protection

If you're thinking of becoming a rideshare driver, it's also worth setting up an LLC to provide an additional layer of protection. An LLC -- limited liability company -- provides corporation-level liability protection when properly set up.

Instead of driving under your own name, Jillian Doe, you would use your LLC's name -- Jillian Doe LLC, Doe Global Transport, or whatever -- and your car, insurance policies, and other business essentials would all be in the LLC's name. If someone wants to sue you, they would have to sue the LLC, not you personally.  

Having your own LLC can also be a big help at tax time, as it can help you keep your business and personal income and expenses separate, giving you a more realistic picture of just how profitable -- or unprofitable -- your driving sideline really is.

There are numerous websites that have more complete explanations. You should also talk to your tax advisor and attorney for advice and counsel.


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