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Do Freelance Drivers Need Commercial Auto Insurance?

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Gigly team, Marketing at Gigly
Happy male driver who obtained commercial auto insurance

Freelance rideshare and food delivery drivers have different responsibilities from employees. You must take steps to protect your assets and obtain insurance such as commercial auto.

Your personal and company vehicles are the same, and an accident can be an expensive headache and put your livelihood at risk.

It’s common for freelance drivers to work for multiple companies.

Each one has its specifications regarding commercial auto insurance.

Do you need your insurance policy, or is what they provide enough?

Skip the confusion and keep reading — we’ll let you know which commercial auto coverage you need.

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Learn how to obtain self-employment insurance in your field:

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1. Do Freelancers Need Commercial Auto Insurance?

Ridesharing and freelance food delivery are relatively new industries. It took some time for auto insurance coverage to meet the needs of independent contractors, but most big carriers have revamped their policies accordingly.

However, you shouldn’t rely on your personal auto insurance policy to protect you if you use your vehicle for work-related purposes. Chances are, there’s an exclusion that relieves the carrier of responsibility in the event of an accident.

Talk to your insurance agent about your policy before using your car for business purposes. They’ll likely advise you to get a commercial auto policy or add a rider to cover on-the-job accidents.


2. What Does Commercial Auto Insurance Cover?

Commercial vehicle accident
Your commercial auto policy kicks in when the vehicle you’re using for your business is involved in any kind of accident.

It doesn’t matter if you own or lease the vehicle; if you caused the damage, your insurance policy is responsible for covering the costs.

Most commercial insurance policies provide four types of protection:

  1. Collision coverage
  2. Comprehensive coverage
  3. Bodily injury/PIP coverage
  4. Property damage coverage

Let’s break down what each of these terms means:

Collision Coverage

Your policy’s collision terms cover any physical damage to your vehicle.

Collision insurance may also cover the damage to the other car, depending on whether you live in a no-fault state or not.

Comprehensive Coverage

Comprehensive coverage is used in situations where the damage occurred for reasons other than a vehicle-to-vehicle accident.

Think of this as your protection against theft, vandalism, and those kamikaze deer that like to jump in front of your car from out of nowhere.

Note: Sometimes collision coverage and comprehensive coverage are bundled together under the umbrella term “physical damage coverage.”

Bodily Injury/PIP Coverage

Should anyone get hurt in the accident, bodily injury coverage pays for their medical expenses up to your policy limits.

If you are injured, personal injury protection (PIP) coverage takes care of your medical payments.

Property Damage Coverage

If you’re at fault in the accident, property damage liability covers any repairs to the other person’s vehicle and pays to fix or replace any property harmed.

As you shop around for quotes at different carriers, keep in mind that you can get cheaper insurance by dropping certain coverage options, like PIP. However, you’ll be responsible for the expenses in the sections you’ve excluded if you’re in an accident.


3. Does My Delivery Job Cover Car Accidents?

When you drive for Uber, Lyft, or a similar company, you’re not technically an employee; you’re an independent contractor.

While this makes ridesharing and food delivery fun ways to get into the world of entrepreneurship, this distinction lets the company absolve itself from the responsibility of your actions, including car accidents.

Nevertheless, some food delivery companies do offer coverage. The exact amount of coverage provided depends on the company you work for.

Since it’s in your best interest to work for driver-friendly companies, here are some popular brands and an explanation of their insurance processes:

Amazon Flex Insurance

Amazon Flex requires delivery drivers to carry their commercial vehicle insurance. The company provides the following forms of coverage if your accident-related expenses exceed your policy limits:

  • Liability coverage
  • Uninsured/underinsured motorist coverage
  • Collision and comprehensive coverage

DoorDash and Postmates Insurance

These food delivery giants cover bodily injury and property damages up to $1 million if you’ve caused an accident while actively delivering for them. You must have the order in your possession when the accident occurs for coverage eligibility.

As long as your insurance has exhausted its limits, DoorDash and Postmates take care of the rest of the damages.

GrubHub and Instacart Insurance

GrubHub and Instacart don’t provide drivers with any protection. You’re required to have liability coverage that meets the legal requirements for your state.

Uber Eats Insurance

One of the largest food delivery companies, Uber Eats takes care of its drivers with a $1 million commercial policy. It kicks in as soon as you’ve accepted an assignment and doesn’t stop until the delivery is in the customer’s possession.

The policy will also cover damage from accidents caused while you’re waiting for another delivery, but only if your insurer denies your claim.

Keep in mind that most of these companies’ coverage kicks in only after your policy covers a portion of the cost. Your personal auto policy may not cover any of the cost, so you should have a commercial policy or business rider.

Did you know that UPS hires freelance drivers? Learn all about this opportunity in our article: How to Become an Independent Contractor for UPS.

4. Does My Rideshare Job Cover Car Accidents?

Smiling delivery driver delivering package
Uber and Lyft currently dominate the rideshare industry, but other, smaller companies are up and coming.

No matter which service you work for, if it’s a rideshare company, you’re an independent contractor, not an employee.

As such, your insurance must cover at least part of the damage if you cause an accident while actively driving for a rideshare company.

However, because rideshare industries are under a magnifying glass of scrutiny, Uber and Lyft have a vested interest in protecting you and your passengers, so they do provide some coverage.

Lyft Insurance

Let’s take an in-depth look at Lyft’s auto insurance processes for driver-related accidents.

Responsibility for insurance coverage is determined mostly by whether the Lyft app was on, active, or off when the collision occurred.

If the App Is Off

When the app is off during the accident, you weren’t technically working for Lyft, so you’ll file your claim through your personal insurance provider.

If the App Is on but You Don’t Have a Passenger

If the app is on, but you don’t have a ride in progress yet, your personal insurance could cover you, but they don’t have to; they can claim you were driving your car for business use.

If they deny coverage, Lyft will step in with $50,000 per person for bodily injury and $25,000 in property damage protection.

If You Have a Passenger

Say the app is on, and you have a passenger entering or exiting the vehicle, or the ride is in progress when the accident occurs. Their medical bills need to be covered.

Your business auto insurance policy is responsible for coverage, but Lyft will help where yours leaves gaps (aside from the deductible).

Lyft provides up to $1 million in liability insurance, including underinsured and uninsured motorist bodily injury.

Since the responsibility for damages in an accident can get confusing, it’s better to err on the side of too much coverage with your car insurance policy.

Uber Insurance

Uber’s driver coverage policies are very similar to Lyft’s, with a few extra optional coverage choices.

Drivers for Uber can upgrade their insurance with:

  • Low-cost disability insurance
  • Zero-deductible medical expenses
  • Survivor benefits

Extended coverage is important for freelancers who don’t have corporate disability insurance and want to minimize their financial impact in the event of an accident.


5. How Much Does Commercial Auto Insurance Cost?

As an independent contractor, you shouldn’t expect the company to cover the costs of an accident. At the same time, you want to save money where you can, like any small business owner.

When we’re talking about commercial car insurance, we should mention that investing in a more-than-basic policy is a wise financial move.

You don’t want to get stuck with inadequate insurance coverage, especially if the accident ends up being your fault.

So how much does a fully-loaded policy cost?

Finding the Best (But Cheapest) Coverage

There isn’t an “average” rate for commercial auto coverage because so many factors determine the final price.

The main factor is the one we discussed earlier: your coverage options. You can always reduce your premiums by setting up a piecemeal policy, choosing this-and-that coverage based on what you think you’ll need.

The problem with this kind of approach to your insurance is that Murphy’s Law tends to kick into effect.

As soon as you skip collision coverage to get a cheaper policy is when that self-destructive deer will choose to play chicken with your car.

What Other Factors Contribute to Auto Premium Costs?

Don’t start knocking out sections of coverage to lower your rates just yet. Many factors impact commercial insurance premiums. Here are a few examples:

  • Insurance carrier
  • Bundle coverage
  • Driving habits
  • State requirements
  • At-fault or no-fault
  • Driving record
  • Vehicle type
  • Location

We’ll break down each of these factors below:

Insurance Carrier

Various providers will have different rates. Shop around and get commercial auto insurance quotes for the same coverage from various companies.

Bundled Coverage

If you need multiple types of insurance (homeowner’s, renter’s, personal coverage, auto, etc.), you can get discounts for buying all of your policies from one provider.

You might consider getting a business owner’s policy (BOP), a bundled package specifically designed for small businesses. However, these packages tend to include a lot of coverage and might be overkill for your type of business.

Driving Habits

Insurance companies want to know how often and far you typically drive. People who drive more are considered higher risks.

Sticking to a smaller vicinity lets you claim fewer miles, which may reduce your premiums.

State Requirements

Every state has different requirements when it comes to business vehicle insurance. Your policy might be more expensive in one state because you’re required to have a specific type of coverage not needed in another state.

Here’s a tip: You can save money by keeping all categories protected but reducing coverage limits to only what’s required in your state or by your delivery company.

At-Fault Versus No-Fault

States with no-fault coverage, like Florida and New York, tend to be more expensive than at-fault states. In an at-fault state, the driver that caused the accident has to cover all damages.

In no-fault states, the driver of each vehicle is responsible for the damages, regardless of who caused the wreck. For that reason, no-fault state carriers have higher costs, which are passed down to the insurance policyholder.

Driving Record

The more accidents and tickets you have associated with your driving record, the higher your premiums will be, no matter where you go. You’re considered a “risky driver” to insurance companies underwriting your policy.

Vehicle Type

Driving certain vehicles can make you more or less susceptible to higher policies. Insurers have a list of cars that are safer and, therefore, less expensive to cover in an accident.

Before buying a new car, consider investing in one that will reduce your insurance premiums. Avoid the most expensive types of vehicles.

Location

Your final rates also include some characteristics you can’t do much, if anything, about. Commercial auto insurance policy prices depend largely on the location and the average cost of an accident there.


6. What Other Insurance Do I Need as a Self-Employed Delivery Driver?

Commercial auto insurance isn’t the only type of coverage you need as a self-employed person.

You don’t have employer policies to fall back on, so it’s up to you to obtain all of your insurance yourself.

Luckily, there’s Gigly to point you in the right direction.

The Gigly platform is designed to help independent contractors like yourself find everything you need to build a successful freelance business, such as health insurance.

When you have medical coverage, you’re more likely to go to the doctor for preventative care, reducing your need to take unpaid sick days. Gigly’s partnership with the Alliance of Gig Workers lets you take advantage of the lowest rates on health insurance.

Your Alliance of Gig Workers membership comes with other benefits, as well, including discounts on legal advice, office supplies, and other goods and services. It’s an investment that more than pays for itself.

Sign up for Gigly’s freelancer benefits today!


Conclusion

You need to protect your livelihood.

As a freelance driver, this means ensuring your assets are protected if you’re in an accident with your covered vehicle.

Use this guide and your Alliance of Gig Workers membership to set yourself up for success in your new career journey.