Taxi insurance-When there is a passenger injury in an NYC cab, the assumption everybody makes is that the taxi’s commercial insurance will pay for everything. And while the high liability limits of the taxi are a money fortress, sometimes it’s not the taxi at all — but other drivers on the road.

New York’s high percentage of uninsured drivers—those who are breaking the law by driving without any auto insurance—represents a major financial risk. No wonder then, that Uninsured Motorist Coverage and Supplementary Under uninsured/Under insured Motorist Coverage are extremely important even in the context of well structured commercial taxi insurance.

Understanding Mandatory UM Coverage- Taxi Insurance

Every car registered in New York, including TLC cars are required to have a minimum Uninsured Motorist (UM) Coverage.

• What it is: UM coverage covers the taxi drivers and passenger when the at-fault driver does not have insurance at all. It even covers hit-and-run accidents when the at-fault driver is never found.
• Minimum Limits: The minimum UM limits in New York by law are $25,000 per person and $50,000 per accident for bodily injury.
• The Gap: Since TLC taxis only carry $100,000/$300,000 in liability limits, their mandatory UM coverage is frequently totally inadequate. For example, if an uninsured driver smashes into a taxi and causes serious injury to a passenger in the back seat, that person would be confined to the much lower UM limits for the taxi’s insured unless he or she was covered by her own policy or the taxi owner had acquired higher SUM protection.

Importance of SUM Coverage- Taxi Insurance

SUM Coverage (Supplementary Uninsured/Underinsured Motorist) – SUM coverage is the robust layer of protection that shields you from two situations:

• Uninsured: It would replace the UM coverage, thereby [permitting passengers in a taxi to recover more than $25,000/$50,000.
• Underinsured: This is the most frequent problem. An underinsured motorist is an insurer whose insurance would not be enough to cover the victim’s damages. Because most private new York drivers only carry the legal minimum limits of $25,000/$50,000, a serious taxi accident blows these limits fast.

(In those instances in which this is the case, SUM coverage acts to fill in the gap between the at-fault driver’s inadequate policy limits and the higher SUM amounts purchased by the taxi owner.

Liability Protection vs. Collision Coverage

Here’s a guide to breaking down required vs. optional taxi insurance components:

• Liability Coverage (The Requirement): These are the high limits required by the TLC (example: $300,000 per accident) that cover injuries or damage you cause to others. This is not — it doesn’t cover damage to the taxi itself.
• Collision Coverage (The Option): This is an optional coverage to select to have on your policy and it pays to fix or replace the taxi owner’s vehicle if damaged in a crash, regardless of who’s at fault. As a taxi is an expensive commercial material good, most owners pay heed and buy it. Which means that the drivers or owner must pay for every repair on his vehicle, and make necessary repairs out-of-pocket which leads to an over extended down time & a negative cash flow.

For passengers, the UM/SUM part of commercial taxi insurance is a godsend in a city where you’re likely taking your life into your hands with every low-level or no-coverage yahoo holding himself out as a driver.

Want to know more about the insurance and financial risk of unlicensed “gypsy cabs” or non-TLC vehicles in NYC?