Why Uber and Lyft Drivers Should Not Get Livery Insurance
What is Livery Insurance?
There are some differences between regular commercial insurance and what some people call livery insurance. Commercial insurance is the broadest term for insurance for a car used for business purposes, which includes trucks (think tow trucks, pickup trucks for contractors, cable service vans, etc), or cars for real estate agents, or cars for-hire like limos, for example. Livery insurance is commercial insurance that covers for-hire services, such as limos, taxis, Uber and Lyft.
Will My Commercial Insurance Cover Lyft and Uber?
Some people believe that what they have as a commercial insurance will cover them for use on Lyft or Uber. Unless you specifically spoke to your insurance carrier about using your car for hire, then you are not adequately covered. If you think you pay too little for commercial insurance (<$400 a month), then you may not have adequate coverage if you are on Lyft and Uber. Each and every commercial policy is specifically tailored to your use case so it is best to confirm what coverage you have with your insurance agent.
The above statements were written with the intention of getting your own commercial insurance to cover damages while incurred on Lyft and Uber, which means that you are essentially overriding Uber’s and Lyft’s insurance policy.
Why You Shouldn’t get Livery Insurance
There are a few reasons why Lyft and Uber drivers shouldn’t get Livery Insurance:
- Many drivers don’t make enough to pay for livery insurance
- It is cumbersome and difficult to get in some states
- It requires changing all of your paperwork and plates over for commercial license
- If you lease or have a loan on the car they may not allow you to operate your vehicle in this manner
- You are essentially paying for the same coverage you already get from Uber or Lyft.
I called around recently and gotten a few quotes for commercial insurance that covers for-hire services such as Lyft and Uber, despite that they are more well known as TNC (Transportation Network Companies). The cost of insurance can range between $6-$10k a year for a car worth between $10k and $20k, which includes all of the liability coverage Lyft and Uber already has. Some drivers noted that commercial insurance agents either didn’t have for-hire coverage plans or that they would not insure Lyft or Uber drivers.
The only thing you’re getting when you are buying livery insurance is collision coverage as Lyft and Uber covers liability coverage. I also asked about medical coverage for drivers with the livery insurance policy and they say that they don’t cover that in this policy and that it is generally covered under a workers compensation policy that would run about $1500 a year, which would include short term/long term disability payments. This was just an estimate so if you are really interested, ask your local insurance agent.
I am paying about $600 a year for car insurance, which is full coverage on my vehicle worth about $10k on a good day. Livery insurance for this car would be about $7k with collision coverage, which isn’t bad.
Now lets take a look at the statistics:
On average, Americans drove a total of 3 trillion miles back in 2009 with a total of 10.8 million accidents, which accounts for an accident every 300,000 miles. State Farm recently posted a statistic that any given driver will have an accident claim every 17 years or so, which isn’t too far off from the above statistic. I drive about 12k miles a year, so 20 years is 240,000 miles. Unfortunately I myself had one reported accident so far so I am much higher than the above statistic.
The average auto collision claim was $2950 in 2012 (http://www.rmiia.org/auto/traffic_safety/Cost_of_crashes.asp). Let’s assume that all of these statistics are still in play today.
During an 8 hour shift, I’ll drive just around 150 miles if I am really busy, which accounts to roughly 50k miles a year. This figure isn’t too far off from some full time Uber and Lyft drivers. Even considering these many miles, statistically they wouldn’t get into an accident for at least six years. Just to be safe, lets double the accident rate, so this full time driver will get into an accident once every three years at an average cost of $3000 worth of damage to the car.
So Why Shouldn’t You Get Livery (For-Hire Commercial Insurance)?
I hope that the above numbers show you that paying $7000 in insurance every year to cover the potential collision damage doesn’t make sense when Lyft and Uber already covers liability. You could just pay yourself that insurance cost and you could more than cover yourself for any collision damage you incur.
For reference, the livery or for-hire insurance rate for a car worth $20k is $10k a year, including collision. From this second statistic, you can see that much of the cost is the liability portion of the insurance policy. If you’re car is worth more than $20k, it may make sense to get the livery insurance to pay out for a potentially much larger collision bill.
There are some limited situation that livery insurance is a good idea, such as also running your own limousine business or getting a permit to pick up at the airport in some cities. If you solely drive on Uber or Lyft and are not interested in doing for-hire services outside of Lyft and Uber, it is best to skip the livery or commercial insurance.
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