ICFE eNEWS #16-32 - September 8th 2016
7 Things You Should Know Before Driving
By Jim Garnett, a/k/a Ask Mr.G, a member
of the ICFE's Board of Educational Advisors
For the last few weeks I have been investigating the possibility
of driving part time for Uber. Uber is a ride-hailing service (sometimes
referred to as "ride-sharing") that competes with taxis
and limousines. Passengers hail an Uber ride through a Smartphone
app and arrange for a driver to pick them up, often for less than
the cost of a traditional taxi.
But unlike a taxi driver,
the Uber driver furnishes his own vehicle and is responsible to
pay for his own expenses such as fuel, maintenance, and insurance.
Those expenses are estimated at up to 60% of the driver's gross
The appeal is that the driver can set his own schedule
by determining how many hours and which hours he is available to
offer rides. The driver must take into consideration that the number
of potential riders will fluctuate with the day and the time of
This type of job flexibility creates particular interest
among college students, retired people, and those looking to supplement
their income with a nighttime or weekend job.
It is estimated
that the average Uber driver can make between $10 - $30 per hour,
after expenses, or more in some parts of the country. Tips are not
allowed, and the driver is "rated" by his riders (and
visa-versa) as to his ability to reflect Uber's standards.
So far, so good. It was when I began to ask questions about
insurance coverage that answers were few and far between. It is
near impossible to contact Uber directly since they offer no phone
numbers, email addresses, or website contact links. But after weeks
of research, dozens of Google searches, and conversations with multiple
insurance agents, I have nailed down the following facts, some of
which may vary from state to state:
- Uber offers $1 million liability coverage for their drivers.
This coverage is effective only when the Uber app is "turned
on," and the driver is on duty. I believe this insurance
is provided for the driver at no cost, but I was never able
to conclude that for sure.
- Any collision insurance to cover damages to the driver's
car must be provided by the driver himself.
- If the car he is driving is not paid for and still has a
lien on it, the driver must notify the car's lien holder.
- Uber requires drivers to submit any accident claims to their
own personal insurance first. This can create major problems
for the driver. Why?
- Because many car insurance policies prohibit using the vehicle
for "livery" purposes. Livery is the insurance term
for a chauffeured form of transportation. The term pre-dates
automobiles and extends back to when a horse drawn carriage
was dispatched from a "livery stable" to fetch certain
people and transport them. Some companies expand the definition
to include the transportation of people or products.
- If the Uber driver notifies his personal insurance that
he is driving for Uber:
- his policy may be canceled for having violated
the "livery" prohibition,
- his claim can be denied, and (3) he can be charged for
the retroactive premiums he should have been paying for
this type of usage.
- If the Uber driver buys a "commercial policy"
which will cover livery usage, he can expect to pay between
$2000-$5000 for the annual premium, which is 5-10 times more
than normal coverage.
As many as 92% of Uber drivers surveyed failed to check with
their insurance companies before starting to drive for Uber, while
others who anticipated insurance problems, gambled that they would
not be involved in an accident.
With these insurance issues
in mind, I have decided to forgo the risk of driving for Uber.
I am not telling you not to drive for them, but I am suggesting
you check with your insurance company before jumping behind the
wheel. The time to do your research is not after you have had an
Special thanks to Kemp Huebner (515-276-1797) and
Chris Doubleday (515-964-0637), two veteran insurance agents, for
their insights and information concerning this subject.