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Navigating Auto Insurance in the Gig Economy

Many Americans have begun relying on the gig economy for food delivery, ridesharing, and other everyday needs. Companies in this market primarily utilize the services of independent contractors and freelance workers, most of whom use their own equipment and operate personal vehicles.

While gig economy drivers can usually secure some work-related auto insurance through their employers, most must purchase additional coverage for total financial protection against on-the-clock accidents.

Understanding the Gig Economy 

The gig economy leans heavily on temporary or part-time work, provided mainly by independent contractors who work for multiple companies or use gig labor to supplement more conventional employment. While far from a modern concept, gig labor notably increased after the 2007 economic crash and has continued expanding with the advance of technology. 

The number of people who earned money from platform gig labor more than tripled between 2017 and 2021. Many of these platforms require freelancers to use personal vehicles for work, which can include:

  • Ridesharing services from Uber and Lyft
  • Delivery services through DoorDash, Postmates, and Uber Eats
  • Moving services provided through TaskRabbit or Craigslist
  • Dog pickup and walking services from Rover and Wag

How Traditional Car Insurance Covers Gig Work Drivers 

Traditional car insurance policies only cover accidents incurred during personal use – such as commuting to and from work or traveling recreationally – and almost always deny coverage for business-related transportation. Therefore, most gig economy drivers must purchase secondary commercial auto insurance plans for on-the-job protection.

Personal vs. Commercial Use 

Gig economy drivers typically lose conventional auto insurance protection under the following circumstances:

  • App on but no passenger or order picked up: Turning your app on equates to “clocking in” for work, meaning you will likely require commercial coverage until you turn it back off.
  • En route to pick up: Even without passengers, commutes to the next destination count as business travel.
  • On a trip with a passenger: With a client’s well-being in your hands, you will want commercial coverage with high liability limits and additional benefits like personal injury protection (PIP)

While commercial insurance covers these and other situations, you will still need a personal policy for off-the-clock protection. Gig driving without combined benefits can even result in denied reimbursement following an accident.

Rideshare and Delivery Company Policies 

While Uber and Lyft are legally required to offer drivers some insurance coverage, these policies typically impose limitations and loopholes. For example, having the app on without a set destination or passenger can result in denied claims from both your rideshare company and personal auto insurer.

Uber and Lyft will only reimburse your state’s minimum liability requirement for damages incurred without a ride request or passenger. However, both offer up to $1 million in liability and uninsured motorist coverage en route to or with passengers in tow. Company-provided comprehensive and collision benefits can only equal your car’s actual cash value minus any reimbursement from your personal insurer. Rideshare policy deductibles can range from $1,000 to $2,500.

Insurance Solutions for Gig Work Drivers 

As a gig economy driver, you can purchase supplementary rideshare or commercial auto insurance to fill gaps between your personal and company-provided coverage.

Rideshare Insurance 

Due to the nuances of most company-provided plans, many private auto insurers require gig economy drivers to purchase supplementary rideshare insurance. These policy riders, also known as “ride-hailing insurance endorsements,” cover the interim period when gig drivers have their apps on but do not have designated pick-ups or passengers.

Some private companies also allow members to buy standalone ridesharing policies that combine personal and business coverage in a single package. Ridesharing policies and endorsements can include the following:

Premiums, available benefits, and limits vary by insurer and state.

Commercial Auto Insurance 

If you own a vehicle explicitly used for gig driving and nothing else, you will likely need a full-coverage commercial auto insurance policy. Commercial coverage costs more than personal car insurance but typically offers much higher liability limits and more protection for work-related accidents. 

While prices vary heavily depending on your claims history, driving frequency, vehicle type, and chosen coverages, commercial premiums cost an average of $149 monthly. By contrast, monthly premiums for a personal policy with minimum liability protection average about $53. Notably, if you own a taxi, limousine, or any other vehicle specifically designed for compensated transportation, you may need specialized commercial livery insurance.

Tips for Gig Workers Seeking Insurance 

Follow these guidelines to secure affordable auto insurance for your side hustle:

  • Understand your risks. Ask your private insurer and employer about your coverage details. Explore standalone or supplementary commercial benefits to fill applicable gaps. 
  • Shop around. Because all insurers impose varying premiums and coverage limits, comparing quotes from multiple companies can help you secure the most appropriate and affordable policy.
  • Regularly review and update your policy. Insurance rates and coverage details can change circumstantially. Staying informed about your benefits can help you decide when to make adjustments or switch insurers.
  • Maintain a clean driving record. Avoiding accidents, violations, and insurance claims will ultimately help you secure the lowest possible monthly premiums.

All in All 

While the gig economy has given many Americans a flexible alternative or supplement to conventional employment, affiliated companies often require workers to use their own vehicles for work. Therefore, freelance rideshare and delivery drivers must purchase additional auto insurance protection for business-related accidents not covered by their personal policies.

While Lyft and Uber must legally offer drivers limited insurance benefits, these plans can set restrictions and result in dangerous coverage gaps. Before using your car for gig labor, contact your insurance company to ask about ridesharing and commercial insurance endorsements. If they do not meet your needs, compare options from their competitors to ensure thorough on-the-job protection for the lowest possible rates.

Find an auto insurance policy that meets your needs.

Get a quote

Find an auto insurance policy that meets your needs.

Get a quote