Wednesday, October 23, 2019

Don’t Let Your Kids Become Uber Delivery Drivers

It's becoming an increasingly common situation – parents with children who have been driving for a year or two, are good drivers and who have their own cars think that being an Uber driver is a good way for the kids to earn some money. The hours are flexible so the driving can be done around school hours and other busy times. The money looks good too. The simple calculation done is to take the driver’s per mile income and reduce the gas cost. What is left is the profit that will make the children more independent and reduce the financial burden for the parents. Unfortunately, that is not the whole story.

Image Courtesy: Pexels
What It Really Costs the Driver
There are other costs that need to be entered into the equation – depreciation, vehicle wear, service costs, higher insurance rates, etc. An example of how misleading this simple equation of income minus gas equals profit can be was recently reported in the news. A car owner wanted to make some extra money in his spare time. His car was worth about $20,000. He drove for Uber for a couple of months and made $5,000. During that time the value of his car dropped to about $15,000. About 80% of the driving he had done during that time was for Uber, so about $4,000 of the value drop was due to that. Then there were the extra service costs and new tyres, both of which were needed much sooner than normal because of the Uber mileage. 

The insurance rates also went up because of the endorsement required to cover ridesharing. All in all, these totaled up to more than $3,000. The bottom line is that in the months that he drove for Uber, the driver earned $5,000 but the depreciation and service, insurance and parts costs were in excess of $7,000. In other words, driving for Uber was a big loss. The danger here is that in many cases people drive for Uber for months enjoying the extra cash in hand. It is only after quite a few months that the actual costs involved begin to dawn on them and by then, they have incurred significant losses.Some of those who drive for ridesharing apps think that driving more miles will offset some of their losses. The problem here is that Uber only reports mileage done with riders in the vehicle, which is usually far less than the total miles driven.  Uber drivers lose in every way. When it comes to letting kids drive for Uber or delivery, it is the parents who end up footing the bill.

The Risk Factor

The more a person drives, no matter how good a driver he or she is, the greater the possibility of being involved in an accident. Insurance will, in most cases, not accept a claim filed because of an accident while the vehicle is being used for ridesharing. Endorsements may be available, but that coverage is only for when the driver is between rides and stops when a rider enters the vehicle.

If you want to go ahead with the ridesharing, talk to an insurance agent to understand what the risks are and what the additional coverage will cost.

Tesla Launches Auto Insurance in California

Tesla, along with its high-profile CEO, are frequently in the news. The coverage is both positive and negative, as is to be expected when the CEO is worth over $19 billion and the car seems to be where the future of the automobile industry lies. Recently Mr. Musk’s name was a hot topic in the insurance industry because of the launch of a Tesla insurance product. This is being done via a partnership with an established and well-known insurance company. An emerging auto company entering the field of insurance may seem odd, but Mr. Musk feels that it is the high cost of Tesla insurance that is a major factor in limiting the growth of Tesla sales.

Image Courtesy: Pixabay
The High CostofInsuring Tesla Vehicles

On the face of it, the high cost of Tesla insurance may not appear to make sense. No insurance company disagrees with the claim that vehicles with driver assistance systems are among the safest on the road. In other words, the number of insurance claims for these vehicles will be less than those for traditional autos. However, the problem is that the size of the average claim may be significantly higher for a Tesla than for other cars because of the high cost of the autonomous driving technology. When an accident does occur, the cost of repairs or replacement could be very high.

In California, the cost of insurance through the Tesla insurance product may be up to 20% lower and in some cases, as much as 30%. Tesla says it is able to offer these prices because the company knows its vehicles better than anyone else and is able to leverage that knowledge to offer lower insurance costs. The counter-argument is that while Tesla may know its vehicles best, how does that translate into a detailed knowledge of their drivers? Even the safest of vehicles can be dangerous in the hands of the wrong driver. Has the huge auto insurance industry, with so many years of experience behind it, got it wrong when it comes to Tesla insurance pricing? The jury is still out on this but that does not mean that Tesla owners need to blindly accept that their car insurance will be very costly.

The fact that insuring a Tesla is expensive cannot be argued. That does not mean that a Tesla owner, or the owner of any car for that matter, should blindly accept that insuring his vehicle is going to empty his wallet. Auto insurance is a highly competitive business with every insurance company offering a variety of coverage plans and options, all designed to maximize policy sales. Add that to the fact that insurance needs can differ widely from car owner to car owner. Only an insurance broker, a company that represents a number of insurance companies, will have auto insurance policy choices and options to offer its clients that will enable them to choose the policy that is right for their needs. Automobile technology is rapidly evolving and new vehicle offerings will keep appearing. Before making the decision to buy, contact an insurance professional to know what the insurance will cost you.