October 22, 2021

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Rideshare Insurance For Uber And Lyft Drivers

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On average, the roughly 1.5 million to 2 million people in the U.S. who drive for both Uber and Lyft earn $18.15 an hour before expenses. Just one car accident, though, could easily eat up that money—and more.

That’s why Uber and Lyft drivers likely need separate rideshare insurance to supplement both personal auto insurance and the coverage that’s automatically provided by rideshare companies. A driver’s financial stability could ride on whether they’ve got rideshare insurance.

The Stages of Rideshare Driving

To understand the insurance for rideshare driving, it’s important to know the three phases while a rideshare app is on:

  1. Available: The driver is available to pick up a passenger.
  2. En route: The driver has accepted a ride and is on the way to pick up the passenger.
  3. On the trip: The driver has picked up the passenger and is on the way to the passenger’s destination.

When an Uber or Lyft driver’s rideshare app is off, their personal auto insurance applies. But when the app is on, Uber and Lyft provide some coverage on the driver’s behalf.

Breaking Down Coverage

Now, you might be wondering what some of those terms mean. Here are some definitions related to insurance for drivers provided by rideshare companies.

Third-party liability coverage

This pays for bodily injury and property damage caused to a third party from a car accident. A third party is someone or something other than the driver or their vehicle. For example, if a rideshare driver rear-ends another car, auto liability insurance pays the other driver.

Uninsured/underinsured motorist bodily injury coverage

This coverage pays for injuries suffered by a rideshare driver and their riders if a car accident happens during an rideshare trip and another driver is at fault who doesn’t have sufficient insurance. This coverage also might apply in the case of a hit-and-run accident.

The coverage limits provided by the rideshare insurance company will vary by state.

Contingent collision and comprehensive coverage

If you carry comprehensive and collision coverage on a personal auto insurance policy, the rideshare company will provide the collision and comprehensive coverage during the time you’re going to pick up a rider or have a rider. A deductible (which can be substantial) will reduce a claim payment for these coverages.

Does My Personal Auto Insurance Cover Rideshare Driving?

Personal auto coverage typically excludes rideshare trips. That’s because your auto insurance company has priced the policy assuming you’re driving yourself, relatives and/or friends, and that you aren’t earning money from private trips and putting a lot of extra miles on your car.

As a result, a rideshare driver’s personal auto policy typically won’t supply coverage while you’re making rideshare trips.

Many insurers now offer rideshare insurance, including Allstate, Geico, Farmers, Liberty Mutual, Progressive, State Farm and USAA.

Minding the Gap

A rideshare driver might be happy with the insurance provided by the rideshare company, especially if the driver carries only the minimum personal auto insurance required by the state. In those cases, a million dollars in liability coverage from Uber can look like a major bonus.

But there can still be gaps, which is where rideshare insurance comes in. For example, rideshare companies don’t provide collision or comprehensive insurance when the app is on and the driver is waiting for a ride request. And a personal auto policy that includes collision and comprehensive likely won’t cover that period. So if you accidentally back into a pole, you’d have no insurance for the damage.

“Without additional rideshare coverage from their personal auto insurer, drivers may find their existing coverage may not apply to a loss that occurs while they are acting as a rideshare driver,” says Luis Sahagun, a spokesperson for Farmers Insurance.

Geico’s rideshare policy, for instance, replaces a driver’s personal auto insurance policy. The policy combines personal and business coverage, meaning a driver is covered whether the rideshare app is on or off.

Geico gives this example of how its rideshare policy works: A driver has turned on the rideshare app and is waiting for a ride request. The driver’s car is involved in an accident. The car is damaged, and the driver is hurt. Geico says the driver’s personal auto insurance policy and the rideshare company’s coverage might not pay all of the driver’s medical and repair bills. But Geico says its rideshare insurance would cover those bills.

In some states, a rideshare driver might be able to buy a rideshare endorsement, or add-on, for a personal auto insurance policy. This endorsement can help fill gaps between the rideshare company’s coverage and a driver’s personal coverage. For instance, a rideshare endorsement may pay the $500 difference between a rideshare company’s $1,000 deductible for collision coverage and a $500 deductible for the driver’s own collision coverage.

The cost of a rideshare endorsement or insurance policy will vary among companies. State Farm says its rideshare insurance endorsement typically adds 15% to 20% to the policyholder’s premium. USAA says its rideshare add-on costs as little as $6 a month.

“I highly recommend that all rideshare drivers have rideshare insurance,” says former rideshare driver Harry Campbell, founder and owner of The Rideshare Guy blog and podcast.

What Happens if a Rideshare Driver Hides Their Driving Gig?

Failing to divulge to your insurance company that you’re a rideshare driver could lead to negative consequences, says Loretta Worters, a spokesperson for the Insurance Information Institute, an industry trade group.

For instance, an insurer might reject a claim for damage a rideshare driver’s vehicle sustains in a crash if the driver doesn’t have a rideshare policy or rideshare endorsement. Or the insurer might drop the driver as a customer.

“This could be financially devastating to someone who is driving for business and has no financial protection,” Worters says.

Sahagun says Farmers relies on its customers to report when they’ve decided to become a rideshare driver, since the insurer has no other way to gather that information. So it falls on rideshare drivers to know what actions are needed to get the right protections while working.

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