By Damon Poeter
Earn some extra cash. Set your own hours. Meet new people every day.
Ride-sharing jobs offered by companies such as Uber and Lyft appeal to people of all ages, from professionals who want to boost their income to retirees who enjoy the company of others. This “sharing economy,” also known as the “gig economy,” is one of the fasting-growing segments of the U.S. economy.
As many as half of all adult Americans have used ride-sharing services, played guest or host via a home-sharing service like Airbnb or participated in this new engine of commerce in some way. Around a quarter of American adults have “offered some kind of good or service” in the app-driven sharing economy, according to Time.
But before you install a ride-sharing app on your phone and start picking up passengers, there a few things you should know, according to Rich Lunsford, a USAA advice director and CERTIFIED FINANCIAL PLANNER™ practitioner.
Most ride-sharing companies require drivers to be at least 21 years old and have at least one year of driving experience in the U.S. (sometimes more if you’re under 23). You’ll also need:
• A valid U.S. driver’s license
• Proof of vehicle registration
• Proof of vehicle insurance
• An eligible four-door vehicle
• A smartphone (five years old or newer)
• After you sign up with a ride-sharing service, typically you’ll have to undergo an online screening and background check on your driving record and criminal history.
“Typically, a standard auto insurance policy excludes coverage for you if you are operating a livery service, like a taxi,” Lunsford says. “Your personal auto insurance excludes coverage when you’re a taxi, so Uber, Lyft and such companies offer coverage for you when you’re driving for them.”
But there are gaps in how and when a ride-sharing service covers you as a driver, and they can be confusing. First of all, if you’re driving but not working, with your ride-sharing app off and not accepting passenger requests, the ride-sharing company does NOT cover your auto insurance. After that, it gets a bit tricky, according to Lunsford.
Each ride-sharing company adds its own wrinkles to how it handles driver insurance, but most policies are similar. What you need to be aware of is that your coverage will typically change depending on whether you’re doing one of three things while driving with the ride-sharing app on:
• Waiting for a passenger request
• Traveling to pick up a passenger
• Transporting a passenger
• Typically, the ride-sharing company offers more comprehensive coverage when you’re traveling to pick up a passenger and transporting a passenger than when you are waiting for a rider request.
Uber, for example, offers limited third-party liability coverage for an accident where you’re at fault when you’re waiting for a passenger request. But the company doesn’t cover injuries you might receive from a crash involving an uninsured or underinsured motorist or from a hit-and-run collision.
When you’re traveling to pick up a passenger or transporting a passenger, most ride-sharing services offer higher third-party liability coverage – typically, the coverage amount is $1 million of total liability coverage or more. Some services also provide uninsured or underinsured motorist bodily injury coverage for you (and for your passengers when they are in your car).
“It’s very important to understand what the gaps in coverage are when you drive for a ride-sharing service. The best advice is to get a copy of their insurance policy and read it,” Lunsford says.
Ride-sharing companies have different expectations of their drivers and varying reputations for being more or less fair to drivers in terms of pay and treatment. Some companies will send you a warning and then deactivate you as a driver if you don’t pick up a certain number of rides a month, while others are more relaxed. If you frequently accept rides and then cancel them or ignore lots of ride requests while “on the clock,” this can also result in penalties or even deactivation.
Your best bet is to research the ride-sharing companies you’re interested in driving for, study their own published driver guidelines, and search online for reviews and critiques by current and former drivers for a given ride-sharing company.
Richard Lunsford is an advice director within the Enterprise Advice Group at USAA and a CERTIFIED FINANCIAL PLANNER™ practitioner. He holds the designations of Chartered Financial Consultant, Chartered Life Underwriter and Registered Corporate Coach. With more than 20 years of experience in the financial services and insurance industry, Rich has a wealth of knowledge advising clients on asset allocation, retirement planning, portfolio construction and risk management.
¹Countrywide average price for policyholders who have $100,000 per person/$300,000 per accident Bodily Injury coverage. Rideshare Gap Protection extends your personal auto policy coverage from the time you turn on the rideshare app until you are matched with a passenger. Rates vary by location and risk and are subject to change.
The trademarks, logos and names of other companies, products and services are the property of their respective owners.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
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