Rideshare Insurance: How It Works, What It Costs, and Where to Buy It

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The last thing any rideshare driver wants is an accident. But it’s impossible, as well as short-sighted, to ignore the fact that the more you drive, the more likely you are to be involved in one. Even the best, most alert, and adroit drivers can be hit by another driver who’s not so skilled or alert—like someone who’s texting and driving at the same time. How will you pay for damages, injuries, lost time, and lost income?

Does my personal auto insurance cover me as a rideshare driver?

You already have insurance, right? Of course you do.

When you submit your application to Uber or Lyft, you must show proof that your car is covered by at least the minimum amount of insurance your state requires. While such policies protect you, they are typically in effect only when you’re driving for personal use and not when you’re driving for a rideshare company. 

Once your vehicle goes into use for the purpose of earning money while driving, such as when you pick up a paying passenger, you become a “driver for hire.” In many cases, this will invalidate your individual insurance policy. 

How do Uber and Lyft cover drivers?

The good news is, even when your personal insurance policy isn’t in effect, both Uber and Lyft offer coverage for you while you’re driving for them. Here’s a rundown of the kinds of insurance you need as a rideshare driver, followed by a comparison of what Uber and Lyft have to offer.

First, there’s third-party liability insurance. This covers anyone besides you and your car in the event of an accident. While it’s unfortunate enough to damage your own car or to suffer an injury yourself, it can be especially painful to learn that you’re responsible for injuries or damage to the other people and vehicles involved—and your insurance won’t cover you.

Also essential is uninsured/underinsured motorist bodily injury insurance. This type of policy covers you and your riders if the other party in the accident is at fault and lacks adequate insurance. Such policies also provide protection if you’re the victim of a “hit and run” accident.

Contingent collision and comprehensive insurance covers you as long as you maintain comprehensive and collision coverage on your personal auto insurance policy. It will help cover physical damage to your car up to its actual cash value, no matter whose fault the accident might be.

Now, based on different driving scenarios, we’ll look at the coverage offered by Uber and Lyft.

When you’re offline and the Driver app is off, you’re covered by your private insurance policy. Neither Lyft nor Uber will cover you when you’re not using their apps.

When the Driver app is on and you’re waiting for a ride request …

Uber offers third-party liability in these amounts:

  • $50,000 in bodily injury per person
  • $100,000 in bodily injury per accident
  • $25,000 in property damage per accident

Lyft’s primary liability coverage is similar to Uber’s:

  • $50,000 maximum limit per person
  • $100,000 per accident
  • $ 25,000 limit for property damage

Note: Both companies offer third-party liability insurance only when your personal policy is not in effect.

When you’re on your way to pick up riders and/or while riders are in your car, 

Uber’s coverage includes:

  • $1,000,000 third-party liability
  • Uninsured/underinsured motorist bodily injury (coverage varies by state)
  • Contingent comprehensive and collision up to the cash value of your car with a $1,000 deductible

Lyft provides

  • $1,000,000 per accident
  • Uninsured/underinsured motorist bodily injury (coverage varies by state)
  • Contingent comprehensive and collision up to the cash value of your car with a $2,500 deductible.

Note: If you are a Taxi and Limousine Commission (TLC)-licensed driver in New York City, or if you drive in California or Maine, you’re responsible for obtaining your own commercial insurance policy.

Is the insurance offered by Uber and Lyft enough?

You’ll have to answer this question for yourself, of course. But to help you do so, let’s examine the risks you take as a rideshare driver, and then look at some options for making sure you’re totally covered.

Do you need to beef up your policy?

If you don’t divulge to your personal insurance carrier that you’re a rideshare driver, you’re taking a huge gamble. Although premiums can increase substantially when you purchase a rideshare endorsement, it still might be worth it. 

Talk to your insurance agent to find out what your options are. Remember, the insurance carrier has every right to cancel your policy if they discover you’re using your vehicle for commercial purposes. If you lose your private policy, you’ll no longer qualify to be a rideshare driver.

Can you fill in the gap?

It’s comforting to know that Uber or Lyft will pay for damage to your car up to its cash value—but would that be enough if your car was totaled in an accident? That depends on how much you owe on your car.

Ridesharing adds a lot of mileage and wear and tear on a vehicle. As a result, your car is likely to depreciate much more quickly than it otherwise would. 

Let’s say you need $10,000 to pay off your car loan. If the value of the car was reduced due to extra wear and tear (measured by its mileage), it might only be worth $5,000. 

How easy would it be for you to come up with the remaining $5,000?

Gap insurance is designed to help you in that situation. Gap coverage protects you in the event of theft or total damage to your vehicle, up to the amount that you owe on it. It fills in that $5,000 space—or gap—between what you’ll get from regular insurance and what you need to pay off the car loan.

What about medical bills?

You can add a medical payments enhancement to your car insurance policy, which will help you pay the deductibles and out-of-pocket expenses you’re likely to incur should you get injured in an accident. If, like many people in the gig economy world, you don’t have your own health insurance, you really need to think about adding this to your policy.

Are there other options for rideshare drivers?

There are a few ways to add on to your coverage without watching your costs go sky-high.

  • For a few cents on each ride, Uber Optional Injury Protection (through Aon) covers disability payments, deductibles on medical expenses, and survivor benefits. You can sign up within the app. 
  • All-in-one is a service offered by GEICO and Lyft. It takes the place of your personal insurance policy, and offers lower deductibles ($250 instead of $2,500) when you’re driving your car for Lyft. You can even earn extra money (up to $500) per year as you drive. Rates vary.
  • optON lets you pay for insurance as you go. It’s an app-based policy that offers a variety of coverages, which you select each time you drive for four hours or more. Rates vary by location.

Insurance can be a complex concern. It’s well worth the time you spend to review your options and consult with an insurance professional to make sure you’re safe, secure, and totally covered every time you drive.

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