Uber app, San Francisco area © Ted Soqui/Corbis

Dear Insurance Adviser,

Our son who lives with us is in college and needs to make some extra money. Friends of his say they make good money driving for one of the rideshare companies, and he is urging us to let him do the same thing. He’s covered on our car insurance and drives an old car that we bought for him. He says the rideshare company provides extra insurance for its drivers, so we don’t have to worry about buying more coverage. Is he right?

— Carol

© Ted Soqui/Corbis

Dear Carol,

Your son is only partially correct. And the part that he is not correct about could cost you a fortune!

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Rideshare companies, such as Uber and Lyft, are becoming hugely popular, especially among young people. People needing rides use a smartphone app to let their need be known. Then drivers, using the same app, agree to the pickup.

Yes, rideshare companies do provide some liability coverage for their drivers, but only when the driver has a paying passenger. They do not generally provide any coverage when the driver is riding around waiting for the next fare.

Your car insurance and umbrella insurance exclude coverage for hauling passengers for a fee. The problem is that the exclusion applies not just when your son has a passenger but as soon as he starts driving on his way to pick up a passenger. Thus, there’s a coverage gap.

Even if the rideshare company’s insurance provides coverage when a driver is carrying a passenger, it typically won’t cover the time driving to the pickup. If your son causes a serious accident with injuries on the way to a fare, he (and you) would have no insurance whatsoever.

Finally, there is the personal safety issue: the risk, for example, of being assaulted or robbed.

One of the strategies for managing personal risk is to avoid the risk altogether. I think avoiding this risk at this time makes the most sense.

Good luck!

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