The new reality of everywhere high-speed connectivity has made possible new ways of making money, one of which is the smartphone taxi service proxy application, or app. People who want on demand transit from “A” to “B” and are willing to pay for it download the consumer app to hire drivers who download the driver app. The drivers provide the transportation, get a good chunk of the money and the application authors get a slice of each trip.
This exposure is not covered under car insurance in most states because of an exclusion for taxi and commercial services. This type of service has more complicated risk profile because, somebody paying you to drive them to a location is much more likely to sue you in the event of an accident than somebody who is just along for the ride of their own free will and no monetary exchange.
Additional Coverage for Additional Premium
Insurance companies have begun to offer endorsements, or additional optional coverages for additional premium to cover you in the gaps that occur between the transit application owner’s coverage of you and your coverage of you. Having a conversation with an industry professional about these endorsements is more productive by far, if you understand the nuances of the contract employer’s coverage you are choosing to take on.
That is right, this app on your phone becomes your contact employer, (meaning they aren’t withholding for payroll and income taxes) and they have to carry some insurance on the work that you do, to protect themselves and make working for them on a contract basis an attractive thing.
So, learn all you can before you start driving on when their coverage will and won’t pay and why, why not and when it does pay, how much. Then, go to your insurance company to find out about their endorsement, its additional cost and any exclusions that it carries along with it. (Also consult a tax pro to find out how much you should reserve to pay taxes at the end of the year and if you’ll have to file and pay quarterly estimates going forward.)
Why Should you Buy More Than the State-Required Minimum?
This question is asked by many people who believe that they State has their better interest in mind when it comes to things related to finances and insurance. The truth is, that the State requires minimum liability for all drivers to protect itself from getting sued. That is right, if a state were to not have a minimum liability requirement, they could be found negligent in court and the number of cases brought into court would go up exponentially, because who doesn’t want a court order to get free money?
This begs the question; how do you know how much to buy? What should you choose in terms of liability limits? And what are liability limits anyway? A liability limit, is the maximum amount an insurance company will pay out in dollar amount damages for a claim on a per occurrence basis. So, if you get into an accident, and after your car is repaired, you are driving home from the repair shop and have another accident on that trip, that is two occurrences and the insurance company will pay up to the limit for each one.
Paying More Than Legal Cost
The insurance company may pay more than that in legal costs attributable to defending you in civil court. They are not allowed to add this cost into the claim amount because they have to pay the lawyers anyway and their required to count based on what the claimant has received in terms of lost wages, medical bills, pain and suffering. Pain and suffering are hard to quantify and that makes it an attractive category for lawyers looking to get paid, in their client’s better interest of course.
So, you have to set your limits based on what you might lose if you’re brought into court, and that is based on how much you make, in terms of household income, and how much you might lose in a judgement against you, even if your income is less than that annually. In many metropolitan areas, this is at least $100,000 per person/ $300,000 per occurrence and $100,000 for property damage, unless your annual income, or net worth is more than that.
Carrying the Right Limits
Let’s say you make $30,000 and you cause an accident on the way to work, because you can’t be late again. And the person you hit is injured and can’t work for 6 months, and they are a lawyer making an average of $300,000. $300,000 per year times a half year equals $150,000, or 5 times your salary. Welcome to the world of garnished wages, a world that can be avoided by carrying the right limits.
When choosing a limit, look at your annual income, and your home equity, the value of pensions and/or any 401k you have. Do you have additional real estate? Total it all up and add at least 25%, then buy the limit that is above that. If your net worth is $0 or less, don’t think you’re safe with state minimums, get at least $100,000 per occurrence. If you have to skimp, raise your collision deductible, or if you own your car outright, drop collision altogether. Drop rental replacement coverage, or lower medical payment for the people in your car. Sacrifice primary liability only if you have no other choice.
Conclusion
There are several things you’re looking for when shopping for a very cheap car insurance with no deposit and things you need to do to get the best value. Before you start, understand what you need to buy. How much do you make? How much net worth do you have? Are you planning on making part or all of your earnings by contract driving via smartphone transit app? These questions with help you identify your goals as an insurance consumer. In financial terms, that is how much you should be buying in terms of promises to pay, or liability limits under multiple insurance clauses.
The Goals of Your Research Are:
- Develop your understanding of insurance standards in the State where you live.
- Develop a relationship with the hard to find ethical patient educating representative, agent or broker.
- Understand what your expose is, and why you have to cover it.
To do this you will need to:
- Make at least 5 research calls
- Take methodical notes containing details of who and when you spoke to, whether they seem honest and knowledgeable how competitive their insurance product is relative to what you have now, or other quotes you’ve gotten.
- Understand the realities the insurance companies are dealing with, in terms of claims and interest rates, what you or your representative can control, and what is bigger than either of you.
The end result should be insurance that is the lowest possible price you can pay for the coverage that you need. You should be paying as little as possible for the most generous insurance clauses, promises to pay, with the fewest adverse exclusions as possible.
