Navigating Personal Auto Insurance For Delivery Drivers

Many businesses—like restaurants and grocery stores—rely on delivery drivers who use their cars. Before the pandemic, Americans had already been enjoying the convenience of having both essential and non-essential items delivered to their doorsteps. In 2019, Americans spent approximately 11 billion dollars on pizza delivery alone, according to Statista, a market, and consumer data provider.

Overall, food delivery revenue increased by more than 20% in 2020 compared to 2019. Grocery delivery has also been trending upwards, with more than half of the grocery stores in the U.S. offering home delivery or store pick-up options. As of May 2020, online grocery web searches increased by 202%. But even before the pandemic, 45% of Millennials and 44% of Gen Z shoppers reported they only or primarily shopped for groceries online.

Post-Covid, the upward trend for delivery service is likely to continue, which means there will be a need for delivery drivers. Before you sign up to make deliveries, make sure you have the correct type of car insurance. If you don’t have the right coverage, you could end up with a financial disaster if you get into a car accident.

The Coverage Gap Between Personal and Employer Auto Insurance

Depending on your car insurance company and your employer’s insurance, there may be a gap between both insurance policies. For example, you might have coverage through your employer while driving a takeout order to a customer, but not while driving to the restaurant to pick up the order.

If you’re in a car accident during a coverage gap, your personal car insurance company could deny coverage, meaning you could be stuck with property damage and medical bills.

The best strategy: Call your car insurance company before using your car for work. If you don’t have the right car insurance for your delivery work, you could get stuck paying big auto accident bills yourself.

Do You Need a Commercial Auto Insurance Policy to Deliver Food?

You may need a commercial auto insurance policy if you’re a delivery driver. That’s because food delivery is “business use” of the vehicle, not personal use.

Car insurance companies see business use as a higher risk than personal use and charge higher rates accordingly. Delivery drivers are more likely to get into accidents and file car insurance claims. Commercial auto insurance policies aren’t only for food delivery but also any type of work that could fall under business use, like delivering packages and driving customers.

If you start driving as a job (whether full-time or as a side hustle) and don’t tell your auto insurance company, you could face a claim denial in the future if you cause an accident.

Examples of Employers and Insurance for Delivery Drivers

Depending on who you’re driving for, your employer might provide auto insurance. If you’re a driver, make sure you understand where the employer’s coverage ends and begins and whether there’s a coverage gap between the employer policy and your personal auto insurance policy.

Here’s a look at some employers’ car insurance policies.

Amazon Flex provides drivers with an Amazon Commercial Auto Insurance Policy in all states except New York. To drive for Amazon Flex, you will need to maintain your own car insurance policy. Amazon’s policy includes liability car insurance, uninsured/underinsured motorist coverage and collision and comprehensive coverage (contingent upon you having collision and comprehensive coverage on your own car insurance policy). Amazon’s coverage only applies when you’re driving during a delivery block and does not cover any passengers.

New York drivers may need to buy commercial auto insurance.

Domino’s Pizza stores are often locally owned franchises and owners can purchase commercial car insurance coverage types such as non-owner car liability insurance that can cover drivers’ cars during work times. However, the franchise owner’s coverage may not be sufficient and your personal auto insurance may not cover you for car accidents while you’re working.

DoorDash has a commercial auto insurance policy that covers drivers for up to $1 million in bodily injury and property damage if you cause an accident while on an “active delivery.” This means you need to be in possession of the takeout order.

But here’s the catch: DoorDash’s coverage is an “excess” policy, which means if you cause an accident while on a delivery, DoorDash’s insurance only kicks in after your personal auto insurance coverage is exhausted. If you don’t have your car insurance, DoorDash won’t cover you.

GrubHub requires you to have car insurance and does not provide its drivers with any commercial auto insurance.

Instacart’s independent contractor agreement states that you are responsible for getting your car insurance coverage in amounts “consistent with legal requirements, including any required no-fault automobile liability or commercial liability insurance.”

Postmates offers an “excess” auto insurance policy of up to 1 million dollars in liability coverage per accident for property damage and injuries you cause to others. You are required to carry your own car insurance. Postmates’ coverage only kicks in after your policy limits are exhausted.

Uber Eats offers a commercial auto insurance policy for all drivers, except in New York. Uber’s coverage has up to $1 million in liability coverage from when you accept a delivery assignment until you complete the delivery.

Uber also has collision and comprehensive coverage (contingent upon having these coverage types on your policy) to cover car repairs if your car is damaged. In contrast, on a delivery assignment, though, you’ll have a $1,000 deductible.

Uber’s coverage can also cover you between deliveries if your insurance doesn’t. This is for the period when you are available and awaiting your next assignment. If your auto insurance policy doesn’t cover you during this time, Uber’s commercial policy has up to $50,000 for bodily injury for one person per accident, $100,000 for bodily injury to multiple people in one accident, and $25,000 for property damage in one accident.

What If I Own a Small Business and I Rely on Delivery Drivers?

If you own a small business, like a restaurant or store, and you rely on employees to deliver goods in their vehicles, both you and your employees may need certain types of commercial insurance.

For starters, your drivers generally need a commercial auto insurance policy if they are using personal vehicles to deliver goods or services. As a business owner, you could be held liable if one of your drivers causes an accident and doesn’t have the correct type of insurance. Speak with your business insurance agent about a business owner policy (BOP) and what types of coverages to add.

One commercial coverage type you can add as a business owner is non-owner car insurance. This will cover injuries and property damage if an employee causes an accident while driving their vehicle on behalf of your business. But non-owner car insurance is for drivers who occasionally use their cars for work.

If your drivers use their cars for delivery regularly, they likely wouldn’t be covered under non-owner car insurance. They should look into a commercial auto policy.