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Uber Insurance Problem – Part 3 – The Parent Trap

By February 9, 2017February 23rd, 2021Personal Auto Insurance, Personal Insurance

So your son comes to you one day and says “Dad, I have this great idea! I’m going to use your car to Uber people around town.”  While you know that Uber is not a verb, should you be concerned about your car being used to drive people around town?  The answer is yes.Before I sound like a curmudgeon, let me go on record and talk about the positives of Uber.

First, Uber does present a quick and easy way to make extra money on the side. One can meet different people from different walks of life.  It could be a great experience for someone to learn how to be his own boss.

However with the pros there are cons. For example:

  1. How well does your child know the roads and areas where he wants to drive people? Driver inexperience with roads and directions could increase the chance of an auto accident.
  2. Wear and tear on your vehicle will ultimately result in more maintenance depending on how many miles are put on each week.
  3. As written in previous posts about Uber, your personal auto insurance policy will not provide coverage. Even when a “Ride Sharing Auto Endorsement” is added to the policy coverage, is still inadequate depending on what Phase you are in.

Your son says “But Dad! Uber provides liability coverage while I’m driving the car!”

The one thing that Uber did which I think is outstanding is provide copies of the Auto Liability and Physical Damage coverage that they provide their drivers in Phase 1, 2, and 3. The comments I’m about to make about the Uber Policy are from the 3/1/2016 to 3/1/2017 policies through James River Insurance Company

As of the writing of this blog (January 30, 2017), Lyft has not released copies of its policies.

Uber does provide some form of liability coverage when an Uber driver has activated the app. In Phase 1, Uber provides contingent liability coverage of $50,000 per person for bodily injury, $100,000 per accident for bodily injury, and $25,000 for property damage.

In Phase 2 and 3 in NJ, the limit jumps up to $1,500,000 primary coverage. Primary means the Uber policy pays the first dollar of any claim.  That is great news…for your son.

Rue Says “Dad, you are not covered by Uber!”

When it comes to liability coverage, Uber protects Uber, Uber employees, and the contracted drivers with Uber. If the owner of the vehicle is not the same as the contracted Uber driver, the owner is not covered.

What’s the issue here? If your son is involved in an accident, his name is listed on the police report as the driver and your name is listed as the owner.  If there is a lawsuit from the other party who your son was involved within an accident, or from a passenger in the car with your son, your name will be on the lawsuit papers, guaranteed.

We previously established that your personal auto policy is not going to provide coverage. If you are lucky enough to have a “Ride Sharing Auto Endorsement” on your personal auto policy, you will have some coverage but only in Phase 1 of the app.  Once your son is in Phase 2 and 3 which is the en route to pick up a person or take them to their final destination, you have no coverage.

Rue says “Dad, your car is covered for Comprehensive and Collision coverage, in some situations!”

This is somewhat good news. Uber’s Business Auto Physical Damage insurance policy through James River Insurance Company will include you as an insured.  This coverage only applies during Phase 2 and 3 of the Uber app.  In Phase 1 there is no Physical Damage coverage.

Uber does require you to pay a $1,000 deductible. Also they cap the amount of coverage at $50,000 which is more than adequate if you have a Honda Civic or Honda Accord.   But if your Son is driving your Tesla Model S you may want to think twice about letting him use it.

Your son’s Medical Bills are not going to be covered if he is in an accident.

I talked about thisextensively in my last blog post but it is worth mentioning again. The current Personal Injury Protection Law does not allow medical bills to be paid if a personally owned car is being used to transport people for money.  Note that as of May 1, 2017 the law in New Jersey has now granted SOME form of coverage for medical bills of Uber & Lyft drivers.  You can read more about that here.

Other Uber Insurance considerations:

While your car sits in the auto repair shop usually one rents a vehicle until the repairs are complete. The Uber Insurance policy won’t pay for the rental car.

If your car is totaled in a car accident and you still owe more money to the bank than the value of the car you are on the hook for the difference. The Uber policy does not pick up what we call Loan/Lease Gap coverage.

If your car has a loan or lease, your bank is going to want to have their name on the check to pay for the car’s damage. Uber’s insurance policy is going to make your bank prove that they have no other insurance coverage in place before they put their name on the check.  What this means is there could be a delay in a check being issued for repairs.  At worst, this is an inconvenience but a reality you may face.

Here’s the rub

It’s pretty clear that Uber’s insurance protection is really not designed to protect you but to protect the drivers. Proceed with extreme caution if you want to go down this path.

Scott Harrigan

About Scott Harrigan

Scott started his career in insurance in 1988 and joined Rue Insurance in 2004 as a Marketing Specialist focusing on creating effective risk financing and risk transfer programs for companies and non-profit organizations. In addition to this he is a member of the Rue Insurance educational team that provides ongoing professional development in critical insurance concepts and programs to Rue employees. About Scott | More Posts by Scott