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New California rideshare insurance policy is must-have for drivers

California state officials have approved a new type of auto insurance policy for rideshare drivers that will close the gaps created by previously limited coverage and ambiguous language.

NBC Los Angeles breaks down the details of this new insurance policy, now available through Farmers Insurance:

The rise of rideshare insurance problems

The rapid growth of ride-sharing isn’t surprising – the LA Times states Uber and Lyft alone have reported a nearly 130% increase in monthly usage compared with last year.

With its increased popularity came insurance problems. Rules drafted in 2013 by the Public Utilities Commission created a gap between the coverage on-demand transportation companies were required to provide drivers and the coverage drivers receive from their personal insurance policies.

The original rules only required the companies to provide insurance coverage for drivers when they were en route to pick up a passenger and when the passenger was in the car. But what about when drivers were waiting for a passenger?

Advocates argued that in most cases, it was either unclear or unlikely that personal insurance policies would cover the driver, since he or she would be seeking to use their vehicle for commercial purposes.

Additional coverage isn’t easy to find

According to the LA Times, only one other insurer has filed a ride sharing coverage plan for the state’s approval: an upstart called Metromile, which partnered with Uber to offer drivers a policy that covers the miles they drive on their own time or when they’re waiting to be hired by a paying passenger. Farmers is the first major insurance company to offer such coverage in California.

A new state insurance mandate that goes into effect in July will require all rideshare drivers to have rideshare insurance, a requirement that can be satisfied by the liability coverage offered by Uber, Lyft and similar companies. The law will not require drivers to have the kind of policies offered by Farmers and Metromile. Should they dish out the extra money for optional coverage?

Is closing the gap worth the cost?

The new Farmers rideshare policy includes coverage for an 8% surcharge over its normal rates for a personal auto insurance policy. What’s the increase based on?

Farmers projects that ride-share drivers will rack up 8% more costs from accidents and injuries than a regular driver. But there aren’t really any of these claims to base the projection on, making it an educated guess at best.

So is it worth the extra 8% to purchase this kind of policy? We think so. It’s always smart to address any gaps in your insurance coverage. The liability coverage that Uber, Lyft and similar companies offer doesn’t pay for damage to the driver’s car, injuries the driver suffers, or if the driver is hit by an uninsured driver.

We discussed why it’s important to understand your insurance policies and identify the gaps in your coverage – gaps that most people don’t know are even there. In this case, we know there’s a significant gap between what rideshare companies cover under their liability insurance and what rideshare drivers should be covered for. The extra surcharge is surely worth the extra peace of mind and security that comes with closing the gaps in coverage for rideshare drivers.