How Uber and Lyft Drivers Profit from Livery Insurance
For some full time drivers, it may make sense to get your own commercial livery insurance. I have written before that livery insurance is not a good option for most drivers who are mainly part time, but after all of these price cuts and increases to the safe rides fee, it may make sense for some full time drivers to take a look at commercial livery insurance. If you are interested in doing this, make sure to get livery insurance. Livery insurance is a subset of commercial insurance in that they cover you for transporting paying passengers. The basic commercial insurance will not cover you from transporting paying passengers so make sure to talk to your local insurance agent about transporting paying passengers or that you need taxi insurance or car service insurance.
Below are the main reasons for full time drivers to consider getting livery insurance.
You get to keep the Safe Rides Fee
- Back when the Safe rides fee was only $1, it would take a few hundred trips to recoup the cost of commercial insurance since it is often about $400-$600 a month, depending on the city and where you “garage” your car. But the safe rides fee was increased to an average of $1.46, with some as high as $2.50, so you can recoup your cost after about 300 rides, or approximately 100 hours of driving in a month. For someone that is working full time, this is a reasonable target to hit. I have many livery drivers who have confirmed that they do not get the safe ride fee deducted from their statements.
Personal clients outside of Uber or Lyft
- Skip the Commission – by taking on your own clients, you don’t need to pay a commission to Uber since you don’t need to. You already have contact with the client outside of Uber’s ecosystem and you have your own insurance, so there is nothing different from you running a car service business. Therefore, you get to keep the 20%. However, you will have to worry about pricing (see below) and payment (see below), which you will need to do on your own.
- Charge your own pricing (free of fare cuts) – If you have your own client, you can either charge the same rate as Uber/Lyft or charge them whatever rate you want. This will all have to be negotiated before hand. There are also various fare calculators you can use to record time and distance and then spit out a fare amount. You can then use Square to collect payment and send them a receipt.
- Charge more for having a nicer/cleaner car – If you have a nice car but don’t qualify for a higher tier like UberSelect or UberBlack, you can now charge a higher rate if you take on personal clients. It would have to be some previous agreed rate but it gives you the freedom to set a higher price based on the quality of the car. You may also get a higher rate by just having a 5 passenger SUV as well.
- Don’t have to worry about ratings/deactivation – If you have your own clients, it usually means they like you enough to use only you as a car service so there is little risk that you are doing poorly in their point of view. However, there is a risk that your client will have a complaint about you and send them to Uber, and then Uber finds out that you are running a competing service. I haven’t heard of anyone getting deactivated in this manner, but it may happen if you have sufficient clients outside of Uber.
- Be careful – don’t overly advertise your services to every passenger you get. One way or another, Uber usually finds out if it happens often enough and you may get permanently deactivated for advertising a competing service. There will be times when you will see an opening to offer your services. The most common would be if they ask how they can get you again and you can tell them that you can call your number directly and set up a pickup and that you have your own method of payment (outside of Uber) and maybe even free of surge pricing. You will have to work out how you pitch your services to customers. It will be easier to pitch if you have a nice SUV or luxury vehicle so you can essentially offer UberSelect services without having to really qualify for such a service.
- I will have to add that I know a few people here in Boston with LV plates, but they continue to do Uber full time because they don’t have enough full time clients to keep them busy all the time. However, it is a great way to increase your income and free yourself a bit from the commission, safe ride fee, and fare cuts.
Grey areas with Personal Car insurance
- With your own commercial insurance, you are now legally covered to get paid to drive people around so there is no grey area about your coverage, unless if you do not have enough coverage to meet state requirements (unlikely as your insurance company will warn you about that). Of course commercial is much more expensive, but for some full time drivers, it is worth it for the peace of mind of having adequate coverage. With the rise of rideshare endorsements by various insurance companies in 29 states, this reason has become less relevant as some drivers are now officially and adequately covered by their personal auto insurance to drive for Uber and Lyft.
- Here is a list of rideshare insurances in all 50 states.
If you are driving full time and are able to sign up for UberBlack in your area, definitely consider them if you are serious about making money on Uber. However, I will caution everyone who goes into UberBlack to get the cheapest car you can find that meets the requirement, even for a year. Never get anything brand new for Uber, but their requirements are changing so they may only accept cars 2013 or newer (currently 2010 or newer, depending on the market), which makes it harder to save much money over buying new. Before anyone sign up for this, consider the possibility that Uber could change the rules on UberBlack and that you no longer can drive for Uber. What will you do then? Do you have a backup plan? What is your exit strategy?
For those in Boston, it makes sense to have commercial insurance because this allows you to be able to pick up from the airport, and Uber levies a $8.75 charge for picking up at the airport. Cars require commercial insurance to be able to pick up at Boston Logan airport. There is a $5 toll for commercial vehicles but the toll gets charged directly to the customer in addition to the airport fee, so essentially you are getting $8.75 for having commercial insurance. With about 100 airport pickups a month would be able to pay off commercial insurance, in the range of $600 a month, depending on where you garage your vehicle. There aren’t many airports in the US that are this restrictive and also offer such a lucrative fee for picking up at the airport, but it can be a total game changer if your airport is set up in such a way.
In my next post, I will be going over some ways to save in Livery Insurance so take a look if you are interested in pursuing livery insurance to be more independent from Uber.Have more questions about Uber or Lyft? Head on over to our Rideshare Driver Training Course!