Becoming a Lyft driver can help you generate more income. However, without enough insurance coverage, you could spend unnecessary money while driving for this rideshare service.
While Lyft offers liability insurance and contingent comprehensive and collision coverage, these policies can leave coverage gaps that increase your financial risk. Without the right insurance, you could be financially responsible for repairs and medical expenses if you’re in an accident while driving for Lyft.
You’ll need more than your personal car or Lyft’s insurance to ensure you have enough coverage. This is why purchasing rideshare insurance is so important.
Levels of rideshare insurance
Insurance companies and state regulators have divided ridesharing into distinct coverage periods:
- Period 0: This is when your personal policy is in effect, and you’re not working — you’re offline.
- Period 1: The app is on, and you’re waiting for a ride request.
- Period 2: You’ve been matched with a passenger and on your way to the pick-up location.
- Period 3: The passenger is in the car. This period ends when you drop off the passenger.
Before you start picking up passengers for Lyft, it’s crucial to review your insurance coverage and understand what Lyft’s insurance policy covers. As a rideshare driver, you should be carrying the following coverages:
- Uninsured/underinsured motorist
Lyft offers versions of all three coverages, but protection varies.
“You are considered ‘on-the-clock’ when you have the app on, but you haven’t accepted a passenger, when you are on your way to pick up a passenger; and while driving a passenger. Major rideshare companies, like Uber and Lyft, provide coverage, but it’s important to review what’s included carefully,” says David W. Griffin, Jr., senior vice president at The Dowd Agencies, a Massachusetts-based independent insurance agency.
“They offer the best coverage when you are either driving to pick up a passenger or have a passenger in your car, but significantly less while you have the app on and are waiting to accept a passenger. Rideshare insurance helps to bridge that gap,” he says.
During Periods 2 and 3, Lyft offers $1 million of third-party liability coverage, uninsured/underinsured motorist bodily injury coverage and contingent comprehensive and collision coverage that covers up to the cash value of your car. However, this contingent coverage also comes with a $2,500 deductible. The deductible means paying thousands of dollars out-of-pocket before Lyft’s insurance kicks in to cover any costs.
Will my personal car insurance policy serve as insurance for Lyft?
Personal auto insurance policies are intended only for the personal use of your car. Every personal insurance policy contains a clause that explicitly excludes commercial activities. You’ll need additional coverage once you start using your vehicle for commercial purposes, such as rideshare driving.
“The personal policy will pick up anything that happens to the driver during the course of their personal activities and the commercial policy will pick up anything that happens to the driver during the time they are offering ridesharing services,” says Marci Lall, home, auto and business insurance specialist with FSB Group LTD in Ontario, Canada.
While it may be tempting to hide that you’re a rideshare driver from your insurance company, it isn’t worth the risk.
“Always let your regular insurance carrier know if you are working for a rideshare company or your personal auto policy may be invalidated. This would leave you responsible for any damages in case of an accident,” Griffin says.
In addition to informing your personal auto insurance carrier, you might be able to get the additional insurance coverage you need from this company. Rideshare drivers typically have two options for getting additional coverage: purchasing a commercial policy or adding a rideshare endorsement to their policy.
A rideshare endorsement will increase your premium, but it is significantly cheaper than a commercial policy, which could cost you thousands more every year.
“Once an individual decides to offer ridesharing services, they are required to obtain insurance under a commercial policy for Uber or Lyft. Once they have their commercial policy in place they then need to inform their personal insurance company they will be offering ridesharing services. At this point, their insurance company will add the ridesharing endorsement to their current policy,” Lall says.
How do I get insurance as a Lyft driver?
Several insurance companies now offer rideshare coverage via an endorsement or a standalone policy.
For example, State Farm offers rideshare coverage during all three trip periods. However, getting this insurance will add up to 20% to your premium.
On the other hand, Farmers and USAA only provide coverage during Period 1 when the app is turned on and you’re waiting for a ride request.
You can view our ridesharing insurance by state and carrier chart for more details on different insurers’ coverage levels.
If a rideshare policy is available where you live, adding this coverage may be your best option. Just do your research before picking a policy and avoid the urge to rely solely on Lyft’s insurance policy.
“Coverage and requirements vary by state, so it’s best to consult with your personal auto agent to ensure you are covered at all times — when you are on personal time, while waiting for customers on the app, en route to pick up passengers and while passengers are in your vehicle,” Griffin says. “An experienced insurance agent can help you review your personal coverage and the coverage provided by the rideshare company, and help you see where you may be at risk.”
Lall says to read your policy and understand what’s included and isn’t.
“Have a conversation with your agent, broker or insurance company to make sure that the coverages you have obtained are sufficient for your specific needs. Always have access to your policy. Whether you keep a copy of it in your vehicle or have it digitally stored on your phone, having immediate access to it after an incident will be helpful when stress levels are high,” Lall says.
— Satta Sarmah-Hightower contributed to this story.