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Check Your Auto Insurance If You Plan to Make Deliveries

Guy Delivering Food - Uber Eats - Door Dash - Grub Hub
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The cost of car accidents across the US rounds out to roughly $242 billion per year.

The more often a driver is on the road, the more statistically likely they are to get into an accident. This means that drivers with delivery-based occupations could stand a higher chance of getting involved in a crash.

Without the proper auto insurance coverage, drivers could get stuck paying damages out-of-pocket.

Due to the COVID-19 pandemic, the demand for delivery services has gone through the roof. Between restaurant take-out and grocery drop-off, there has been an increase in work opportunities for various food delivery platforms.

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Thanks to apps like Uber Eats, DoorDash, Grub Hub, and Postmates, it’s easy for nearly anyone with a car to become a contracted delivery driver and earn some extra cash.

However, this line of work carries unique circumstances, especially considering these third-party apps hire drivers as independent contractors rather than employees. The effect of this work on auto insurance is one of the most important considerations.

Keep reading for more information about how your auto insurance may change when delivering food in personal vehicles.

The Grey Area

As technology evolves, the law is forced to evolve along with it. During this process, grey areas often arise that can lead to tricky situations.

Auto insurance for independently contracted drivers is one example of this. These large platforms hiring thousands of drivers across the country. As such, they argue that it would be simply unrealistic to cover every single driver.

Of course, drivers must maintain at least the minimum coverage required to drive in that area legally. Beyond that, there is a huge grey area that can vary between companies.

Some companies do offer some semblance of commercial auto insurance. Though, there are often blind spots that can lead to difficulty settling claims.

For example, a company may insure their drivers while they deliver the products to their customers. But what about when the driver is en route to the restaurant to pick up the food? Must they have the product in their car to be covered?

Furthermore, what about the idle time between deliveries? If they are sitting around waiting for the next assignment and get involved in an accident, is the delivery company off the hook?

Among others, these questions have raised concern over the practice of hiring practices of these companies.

Employment With Third-Party Delivery Services

Whether you enter the industry as a side gig or as a full-time job, there are always pros and cons to independent delivery jobs.

Many drivers enjoy the flexibility that comes with this line of work. You create your own schedule and have total control over the hours worked in any given week.

Plus, if you enjoy solitude, food deliveries provide the perfect occasion to just relax and enjoy time driving by yourself. You have the chance to listen to your own music or podcasts in the comfort of your own vehicle. This is one of the biggest attractions of working for these delivery services.

In the context of the COVID-19 pandemic, most of these deliveries are contactless. As such, in-person dealings with the general public are relatively limited. Thus, it can be a simple way to make some extra income that doesn’t need extensive COVID-19 exposure.

Plus, these jobs are widely accessible as they do not require extensive training or a college degree. But unfortunately, there are various negative aspects to consider as well.

On the one hand, most of these third-party delivery companies do not reimburse you for the gas required to do the job. They also do not reimburse for the wear and tear on personal vehicles.

This means that any property devaluation you experience from the extra miles on your car is not something the company is liable for.

These conditions are resultant from the nontraditional working arrangement.

Working for most of these delivery-based companies classifies you as an independent contractor. This designation carries a whole host of other ramifications and legal considerations.

This is the key difference in working for a company like Uber Eats, DoorDash, or Grub Hub, as compared to a traditional employment situation.

Working as an Independent Contractor

Take, for example, if you were to work for a catering or specialty foods company. Most likely, you would be hired as a W-2 employee and work a given set of hours. Plus, there would be legal protections in place based on the employer-employee relationship.

Furthermore, when going to deliver food to clients, you would likely be driving a company vehicle. Should you get into an accident in this car, there is a different insurance procedure than a typical motorist policy.

The company’s commercial insurance usually covers you. Most states mandate company vehicles liability insurance. There are also usually workers’ compensation insurance policies in place. These cover general workplace accidents, depending on your state.

However, this example would be a typical experience for full-time employees. This is seldom the case for most third-party food delivery companies.

Some companies are exceptions. For example, Uber Eats offers a relatively generous insurance package for their drives compared to other companies.

Most Uber Eats drivers are eligible for the company’s commercial auto insurance policy. It provides up to $1 million in liability coverage. Drivers are covered from when they accept an assignment to when the delivery is completed.

If their car is otherwise damaged while on a delivery assignment, there is also collision and comprehensive coverage available. Though, these policies carry a $1,000 deductible that the driver is responsible for.

This is also contingent upon the driver having their own personal insurance coverage. They do not cover drivers in New York.

These policies are considered a step up from many similar platforms.

Most Likely, Insurance For Property Damage Won’t Cover Uber Eats

It’s important to remember that insurance is all about risk. This is how your insurance carrier calculates the cost of premiums. The costs are based on various factors like age, location, and driving record that help the insurer estimate how costly it will be to insure you.

This is why so many Americans saw their car insurance rates drop during the COVID-19 pandemic. With fewer drivers on the road, there is less risk.

As such, it costs less to insure these drivers than originally estimated. This resulted in insurance refunds and lowered rates for many drivers across the country.

But the more you are out on the road, working for someone else and potentially driving in unfamiliar territory, the risk of an accident increases. As such, regular auto insurance may not cut it.

If you get into an accident while working, you can find yourself in big trouble. Unfortunately, working as an independent contractor doesn’t cover personal car insurance.

Most car insurance companies will require commercial coverage for these food delivery services. When doing this type of work, you are no longer driving for personal use. It is now considered professional use, which carries more risk and thus higher costs.

These same notions would apply to any other type of similar business, like package delivery or ride-share driving.

Your Auto Insurance Claim Could Be Denied

You may choose to partake in these business adventures and continue with your normal auto insurance. However, this is extremely risky.

Of course, every insurance company and each individual policy will vary. But generally speaking, you may have difficulty if you submit an insurance claim for an accident that occurred while making a delivery.

If your auto insurance company finds out about the working situation—you could have your claim denied.

This means you will be stuck with the check for both the property damage to your vehicle and any associated medical bills. Plus, you must factor in the costs for any other vehicles damaged or people injured in the crash. Payments would have to come out of your own pocket, and these costs can stack up very quickly.

Some companies choose a middle-of-the-road approach.

For example, DoorDash does offer some semblance of protection for their contracted drivers. However, their commercial coverage only applies to “active deliveries.” This means that you do not qualify for this coverage if you are not in physical possession of the food order.

Even when they do offer compensation for accidents, it is considered an “excess” policy. The delivery service Postmates offers a similar policy. Essentially, it means their coverage only kicks in at the point your own personal car insurance coverage has been drained.

So if you do not hold your own car insurance, you are completely out of luck.

COVID-19 Considerations

In a “normal” world, most insurers would require commercial car insurance for drivers performing deliveries. However, nothing has been normal about the past year.

In light of the COVID-19 pandemic, some car insurance companies have elected to relax the restrictions on delivery drivers and the applicable insurance required. While this may seem counterintuitive, it can still be beneficial for the insurers themselves.

This is partly due to decreased costs in insuring drivers during the pandemic.

It’s also due to overwhelming unemployment numbers. It’s in the best interest of the insurers that their customers have an income source. This way, they can continue to pay their premiums in full and on time.

Third-party delivery services have provided an opportunity for many unemployed people to get back on their feet. It offers flexible income to accommodate such an unprecedented situation.

Some states’ departments of insurance have also stepped in to provide guidance on the situation.

As COVID-19 restrictions have widely forced the partial or total shutdown of in-person dining, restaurants have had to get creative to stay in business. Many started offering takeout and delivery services that they may not have otherwise been equipped for.

As such, sending out deliveries in personal vehicles has become something of a necessity for many businesses.

This has prompted a handful of states to request their constituent’s insurers to cover delivery services. These states include:

  • Alabama
  • Colorado
  • Montana
  • North Dakota
  • Pennsylvania
  • Rhode Island
  • Tennessee
  • Washington
  • Wisconsin

While they can’t mandate these changes, many states have recommended temporary changes during the COVID-19 pandemic.

The Future of Auto Insurance for Food Delivery Drivers

Issues surrounding insurance coverage and other benefits for independent contractors have not failed to make headlines in recent years.

In the November election, the state of California voted on Proposition 22. This allows gig economy platforms like Uber, Lyft, or DoorDash to avoid classifying their drivers as employees.

After a highly contested and expensive campaign, the measure passed—meaning these companies can continue to classify their workforce as independent contractors.

It did, however, begin requiring these companies to provide new benefits for drivers. This includes guaranteed minimum earnings and health care support.

While this only covers the state of California, this is a big step in the direction of providing benefits to independently contracted drivers. This could be a sign of future developments where more drivers are granted such allowances.

Even once the COVID-19 pandemic winds down, the convenience factor of deliveries on demand will likely continue to boost their popularity. Only time will tell how the auto insurance landscape will shift accordingly.

Check With Your Insurance Before Taking a Delivery Driver Gig

When considering work in the delivery industry, it’s important to weigh all options. The best bet is to call your insurance agent and inquire about the different plans available.

Ask about their policies for independent delivery drivers in personal vehicles. Ask about the cost of adding commercial coverage to your plan. It’s much better to be prepared going into this line of work than to scramble to figure it out when disaster strikes.

For more information on how auto insurance policies affect independently contracted delivery drivers in Massachusetts, consult with an expert advisor today.

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