ICFE eNEWS #16-32 - Sep 8 2016
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7 Things You Should Know Before Driving For Uber

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 earnings.
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 day.
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:

  1. 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.
  2. Any collision insurance to cover damages to the driver's car must be provided by the driver himself.
  3. 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.
  4. Uber requires drivers to submit any accident claims to their own personal insurance first. This can create major problems for the driver. Why?
  5. 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.
  6. If the Uber driver notifies his personal insurance that he is driving for Uber:
    (1) his policy may be canceled for having violated the "livery" prohibition, (2) 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.
  7. 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 accident.

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.

Ask Mr. G
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023

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Sent by:
Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE) - ICFE.info - 619.239.1401