More and more people are dabbling in ride-sharing to supplement their day job income. Some have even made it their full time job. If this describes you, it is important you understand a recent insurance coverage issue. One that could cost you substantially if it isn’t handled correctly.
Consider this: While you are waiting for a passenger match, you get into an accident. It’s your fault and both cars have been damaged. Does Uber cover this collision?
The answer is; only partially—the damage you did to the other car—is covered. Damage to your own car is not covered by Uber’s insurance. This is despite the fact that many people think that they are fully covered whether or not they have a ride request or passenger in their car.
In July of 2015, Uber and its competitors all had to increase their liability insurance. They now have to have primary coverage during what is commonly called “period 1.” Primary coverage means that it takes effect over other insurance policies and “period 1” is any time an Uber driver is “on duty,” but has not yet been matched with someone who needs a ride and does not have a passenger in his car.
While this fills a gaping hole in Uber’s insurance, one that has plagued drivers since Uber’s conception, drivers are still not completely covered. This new policy is liability only. This means that it does not cover injuries, collision, or damages to the driver’s car—only the other party’s vehicle. And if you think that your other insurance fills in the gaps that Uber’s leaves behind, you would be wrong.
In California, new laws have been enacted that actually make it illegal for an insurance company to pay claims that result from damages while a driver is logged into Uber and other ride-sharing apps. That means that your personal insurance will not cover your accident, either.
In order to cover this hole in your coverage, you most likely need to buy a special type of insurance, often called “Period 1” insurance. This type of insurance is specifically designed to cover you while you are logged into Uber, but without a ride-hail or a passenger.
Who Should Pay?
When Uber was brand new, their policy was that the driver’s insurance would be responsible for paying for accidents. Uber was willing to pay for damage and liability, but only if the individual’s personal insurance provider had already denied the claim. This worked for a while, largely because insurance providers did not realize what was going on. Uber was still so new and often very localized, so they didn’t really know what it was or realize that they were paying claims that they shouldn’t have had to pay.
Once insurance companies became wise to the game, they started canceling the policies of those they discovered to be driving for companies like Uber. As a result, drivers started to hide the fact that they ride-shared from their insurance company (a practice more colloquially known as insurance fraud). Some people just hoped they could avoid being in an accident so their insurance provider would never need to find out about driving for Uber.
Eventually, states started making laws that prohibited personal insurance providers from paying for accidents that occurred while drivers were logged in to Uber.
In order to hold on to its drivers, Uber started offering primary insurance, so that they would be responsible for paying the costs of a collision—but only when a driver was matched with a rider or when that rider was in the vehicle.
What About Period 1?
To make up the difference, insurance companies are starting to fill that gap. However, many drivers feel like the policies that address the problem are too expensive. A mere ten percent of Uber drivers have an insurance policy that specifically covers their ride-share activities. Seventy percent of drivers do not have one, but want to buy one. The remaining twenty percent say they have no intention of ever buying one of those policies, either because it is prohibitively expensive or because it is just too much of a hassle.
Before you decide to start ride-sharing yourself or continue ride-sharing, it would be wise to first take a deeper look into the current insurance implications and decide whether the costs are worth the rewards.
You can start by simply calling our toll free number and asking how much a “Period 1 ride-sharing policy” would cost you. If you are ok with the quote you receive, purchase the coverage and continue your ride-sharing with the peace of mind that you are truly fully covered.