Do I Need Rideshare Insurance to Drive for Uber and Lyft?

Ride-hailing, such as ridesharing services like Uber and Lyft, have disrupted how we get from Point A to Point B when we need a ride. And this is changing the way car insurance behaves. In other words, providers are creating coverage products specific to ridesharing.

According to TheRideshareGuy.com, more than 700,000 drivers work for Lyft in the U.S., while Uber has about 1.5 million drivers. With more and more consumers turning to rideshare services, the number of drivers needed to support transportation network companies (TNC) will continue to grow. Insurers are finding ways to provide coverage where needed.

The Basics of Insurance Coverage for Drivers

1. Personal auto insurance will not cover you if an accident occurs while you’re driving for Lyft and Uber.
2. Uber and Lyft only provide full liability coverage once you have accepted a rider or are in the process of driving a passenger somewhere.
3. Rideshare insurance policies are now available to drivers in all states, except North Carolina.

How it Works

Ridesharing is divided into three segments:

Period 1– The driver has opened the rideshare app but has not yet accepted an assignment.

Period 2– The rideshare app is on, the driver has accepted a passenger but has not yet picked them up.

Period 3– The driver is transporting the passenger or the destination has been reached and the passenger is exiting the vehicle.

Period 1: Contingent Liability Coverage

During Period 1, Uber and Lyft provide contingent liability coverage in the relatively low amounts of $50,000 per person, $100,000 per accident for injury liability and $25,000 in property damage, or 50/100/25. Industry experts usually recommend limits of 100/300/100.

The liability coverage received from the rideshare company covers injury to passengers and damage to the other car; it doesn’t cover the driver or the driver’s car. This coverage is provided if the driver doesn’t maintain a personal policy at those amounts or if the personal auto policy won’t cover the accident or event. If an accident occurs during Period 1, the driver will be required to find out if their personal insurance will provide liability coverage. Typically, unless you have a rideshare policy, your auto insurer won’t provide coverage.

Periods 2 & 3: Full Liability Coverage

In order to receive collision coverage from Uber and Lyft during Periods 2 and 3, the driver must have collision coverage on a personal policy. This means that if you’re en route to pick up a passenger or have a passenger in the car, the rideshare company policy will cover passenger injuries and damage to the other vehicles involved. Uber and Lyft will also cover damage to your car if you have collision coverage on your personal auto insurance plan.

Rideshare Insurance

Deductibles for TNC-provided collision coverage can be costly for a typical driver: $1,000 for Uber and $2,500 for Lyft. Fortunately, most states have at least one auto insurance provider that offers rideshare coverage, so drivers don’t have to pay for more expensive commercial insurance. However, an insurer may want you to purchase a full commercial policy if you drive for a rideshare company full-time.

Gap and Extended Coverage

Besides commercial policies, two kinds of rideshare insurance policies are offered: Gap and extended.

Gap Coverage

Gap insurance is an extension of a personal auto policy during Period 1. Gap coverage, along with Lyft or Uber insurance, kicks in when a ride request is accepted (Period 2). It is expected to become common for insurance companies to also provide deductible gap coverage, something that Allstate already offers. This coverage will pay up to $2,500 during Periods 2 and 3, which can help reduce out of pocket costs.

Extended Coverage

Although gap insurance is the most common type of rideshare coverage, some insurance companies offer extended coverage policies, or endorsements, which extend personal auto policies through Periods 1, 2 and 3. Exact details vary depending on the provider. With extended coverage you only deal with your insurance provider; no need to also deal with Uber or Lyft insurance directly.

Should You Buy Rideshare Insurance?

Not all rideshare drivers opt to buy a gap or extended policy, believing that they have enough coverage under the company-provided plan. But, that doesn’t mean that’s the right choice to make.

Rideshare insurance reduces the drivers’ risk of facing often costly expenses not covered by the company-provided insurance. In a serious accident, the policy provided by your TNC could leave you responsible for a high remaining balance; you would also have to cover repairs to your car and medical costs you incur due to personal injury.

Explore Your Options

If you are an Uber or Lyft driver, talk to your auto insurance provider to find out what the company offers. You can also get quotes and compare policies and costs from several insurers using our quote generating tool. Make sure you get the coverage that makes sense to you.