Entrepreneur John McAfee calls the gig economy empowerment; critics aren’t so sure. But whether you love it or hate it, the gig economy is here and it affects all spheres of life for those participating in the grind, including insurance. But is insurance keeping up? Drivers who take the wheel for Uber, Lyft and other ridesharing companies, and those who race deliveries across town for Grub Hub or Postmates may assume that in today’s age of constant innovation, their insurance policies are flexible enough to respond to any way they choose to use their cars. In many cases, they are wrong.
What’s the issue? All personal auto insurance policies have SOME restrictions for the commercial use of your car. What type and how severe the restrictions are will vary by insurer. A general rule of thumb is that the larger and more well known the insurer (IE you see their ads every time your TV is on), the more restrictive they will be on using your vehicle to earn cash. All insurers will exclude coverage when you are operating as a taxi or rideshare driver, but only SOME will void your coverage for food delivery. Some online insurers that target high risk clients actually exclude ALL coverage anytime you use your vehicle for work in any manner (even running out to take the deposit for your boss or to bring back lunch for the office).
So what can you do? The first step is to make sure you are working with an insurer or agent with whom you can have a quick and easy conversation. Before you consider putting your car to work hauling people, food,…or anything for a fee, give them a call or text to check your coverage. If you presently buy insurance directly from an insurer consider getting quotes from an independent agent instead. If you are going to be using your car on the side for any type of commercial use you are much safer getting advice from a pro and not trying to work it out on your own.
What you will likely find when you contact your insurance adviser is that most rideshare programs will cover your liability insurance while you have passengers onboard but that you have a gap in coverage from the time when you turn on your app and troll for passengers until the time you pick up your fare. This gap can usually be filled by adding an endorsement on your policy. It may not be as expensive as you think.
Food and parcel delivery is another matter. Some providers cover you while you have a delivery on board and some do not. Those that do provide some insurance will only cover you once you have a delivery on board–not while you merely have the app turned on. This is where a conversation with your agent is vitally important because what you are delivering and who your insurer is will determine whether you need to buy extra coverage or not. Most independent agents will represent both companies that WILL provide insurance for delivery vehicles and those that will NOT, so once you have alerted your agent to your needs they will be able to make sure you are matched with the right insurer.
A final consideration is to always be up front. When you purchase a policy you will be signing an application and making certain affirmations. If you sign an application indicating that you do NOT drive for any commercial purposes but you actually do, you could find yourself in a situation where you actually void your policy for misrepresentation when, in fact, it might have covered you if you simply told the truth. Honesty really is the best policy.
The summary? Whether you find the Gig Economy a blessing or a curse, don’t be cursed by a lack of insurance. Ask questions, be up front, and work with a pro you trust!