Driving for a Transportation Network Company

Thinking about driving for Uber or Lyft? These and other transportation network companies make it easy to earn money on your own schedule, with your own car. But they also could give you insurance headaches, particularly if you get into an accident while waiting for an assignment.

First, let's back up. Most states and many countries require motorists to have personal auto insurance. These policies, however, rarely cover a driver who's ferrying passengers, even if those passengers are in the driver's personal car. That's because that act is considered commercial.

Your personal auto carrier most likely requires notification if you are driving for a ride-hailing company or using your car to deliver goods for say, Amazon. How the insurer will respond will vary, but you risk being dropped altogether if you keep your business a secret, then get into an accident. In some states, you also must inform the lender financing the vehicle.

Don't turn off the ride-hailing app just yet; there are several options for drivers. It's important, though, to understand coverage is typically based on three distinct periods related to the ride-hailing driver's actions.

In Period 1, the driver is signed in to the ride-hailing app and awaiting an assignment. Period 2 begins when an assignment is accepted and lasts while the driver is en route. Period 3 covers the time the passenger is in the vehicle.

Policies available through Uber and Lyft—the largest TNCs—provide certain liability coverage for all periods, but collision only kicks in at Period 2. Keep in mind, too, that deductibles may vary and coverage may be limited. You're also not covered if you're driving for other business purposes or other providers. And you must have your owner personal insurance while driving for either company.

You also can obtain a commercial auto policy similar to what taxi and limo drivers carry. These are usually robust but more expensive than personal cover. If you drive for a TNC a lot, however, it might be worth purchasing because coverages are typically higher and protections broader than what you'd find in a personal policy.

Another option is hybrid coverage, which is becoming more popular among personal lines carriers. As the name implies, this insurance covers personal and commercial driving.

Working for a ride-hailing service is more complex than just clicking on an app and fetching a fare. Understand your insurance needs and what you have—either from the transportation network company or another carrier—so you are covered from the time you turn on the app until the moment you drop off your passenger. Driving for a TNC could be a fun, convenient way to make money and take advantage of the access economy. Just be sure you don't get taken for a ride when it comes to proper insurance coverage.