Ridesharing companies like Uber and Lyft have completely transformed transportation.
Millions of people use these services to travel to school, work and social events, and millions of drivers now rely on these companies for employment.
However, while driving for these rideshare companies can generate an income while controlling your own schedule, being a rideshare driver comes with several car insurance considerations. Getting rideshare insurance is one of the most important.
If you’re contemplating driving for Uber or Lyft, here’s what you need to know about rideshare insurance.
Why do you need ridesharing insurance?
As a rideshare driver, you operate as an independent contractor. That means you’re essentially running your own business. As a self-employed person, you need to have all the necessary insurance protections to safeguard your business.
However, regular car insurance doesn’t cover rideshare drivers when they operate their vehicles for business rather than for personal use. Though ridesharing companies like Uber and Lyft offer insurance, this coverage differs depending on which phase of the trip the driver is in.
Generally, you can divide ridesharing into the following periods:
- Period 0: The driver is conducting personal business — the app isn’t on.
- Period 1: The app is on but the driver is waiting for a passenger.
- Period 2: The app is on and the driver is going to pick up a passenger.
- Period 3: The app is on, a passenger is in the vehicle and the ride has started.
Uber and Lyft cover their drivers, but this coverage is only in effect once you’ve accepted a ride request (Period 1) to the time you have a passenger onboard (Period 3).
However, the insurance’s liability limits are generally low, come with high deductibles that can range anywhere from $1,000 to $2,500, and include several coverage gaps that can increase your out-of-pocket costs if you were to get into an accident or have medical bills related to an accident that occurred before or after any of these periods.
This is why rideshare insurance is so important. It can fill these coverage gaps and provide more insurance protection throughout the time you’re using your vehicle to pick up passengers for Uber and Lyft — even in some cases when you haven’t turned on the app yet.
How does ridesharing insurance work?
If you have your own personal vehicle, you must meet the minimum liability requirements for car insurance in your state. However, these requirements apply for the personal use of your vehicle, not for rideshare pick-ups.
For the initial years after Uber and Lyft first launched, most insurance companies didn’t provide liability or comprehensive coverage under one umbrella policy that covered both personal and commercial use of a driver’s vehicle. Insurers didn’t want to take on the added risk at that time.
However, many insurers now either offer:
- Separate rideshare insurance policies
- Allow drivers to purchase gap insurance or to add an endorsement to their personal auto insurance policy
With this approach, you can get rideshare insurance from insurers that cover all phases of your trip.
Dan Karr, founder and CEO of Valchoice, a free auto insurance grading tool that helps consumers determine the strengths and weaknesses of their coverage plans, says Uber and Lyft insurance isn’t enough for rideshare drivers. Additional coverage is really necessary.
“If you’re using rideshare insurance through Lyft or Uber, drivers will need to purchase additional coverage in order to insure the full amount of a loan or lease on their vehicle will be paid off in an accident. Otherwise, they could end up in a position where they need to come up with the money after an accident,” Karr says.
Ridesharing insurance policies
One of the main challenges of Uber and Lyft’s insurance policies is that they generally come with low coverage limits.
Lyft’s coverage and Uber’s coverage include:
- $100,000 of bodily injury coverage per accident
- $25,000 of property damage coverage per accident
- $1 million coverage if you were to get into a covered accident while the app is on.
The two companies’ liability coverage limits are lower than what’s recommended by experts:
- $100,000 of bodily injury coverage per person
- $300,000 of bodily injury coverage per accident
- $100,000 of property damage coverage per accident
Not having that level of coverage means you may have to pay higher out-of-pocket costs if you’re in an accident.
Another challenge is that rideshare coverage varies by state and isn’t available everywhere.
For example, Geico’s rideshare coverage is only available in 39 states and not in Alaska, Georgia, Hawaii, Kentucky, Nevada, New Jersey, New York, North Carolina, Texas and Utah.
Also, some insurers offer coverage for all three periods, while others don’t. Geico provides coverage for every phase of your trip, while Allstate’s rideshare endorsement only offers coverage during period 1. You’d have to file a claim with Uber or Lyft if you had an accident during the other two periods.
Ridesharing insurance by state
Allstate provides some reimbursement to help you cover the deductible for your claim through Uber or Lyft’s insurance.
It’s important to weigh all these factors when choosing between rideshare policies.
Let’s look at the differences by company and state, as of March 2020:
|State||Company||Period of Coverage|
|Alabama||Farmers Insurance||Period 1|
|Arizona||Farmers Insurance||Period 1|
|Arkansas||Farmers Insurance||Period 1|
|California||Farmers Insurance||Period 1|
|Colorado||Farmers Insurance||Period 1|
|District of Columbia||Allstate||All|
|District of Columbia||Erie||All|
|District of Columbia||USAA||Period 1|
|District of Columbia||Geico||All|
|District of Columbia||State Farm||All|
|District of Columbia||USAA||Period 1|
|Florida||FarmersÂ Â (Foremost)||Period 1|
|Kansas||Farmers Insurance||Period 1|
|Michigan||Farmers Insurance||Period 1|
|Minnesota||Farmers Insurance||Period 1|
|Missouri||Farmers Insurance||Period 1|
|Montana||Farmers Insurance||Period 1|
|Nebraska||Farmers Insurance||Period 1|
|Nevada||Farmers Insurance||Period 1|
|New Jersey||Farmers Insurance||Period 1|
|New Jersey||State Farm||All|
|New Jersey||USAA||Period 1|
|New Hampshire||Liberty Mutual||All|
|New Hampshire||State Farm||All|
|New Hampshire||USAA||Period 1|
|New Mexico||Farmers Insurance||Period 1|
|New Mexico||State Farm||All|
|North Dakota||Farmers Insurance||Period 1|
|North Dakota||State Farm||All|
|North Dakota||USAA||Period 1|
|Ohio||Farmers Insurance||Period 1|
|Oklahoma||Farmers Insurance||Period 1|
|Rhode Island||Liberty Mutual||All|
|South Carolina||Liberty Mutual||All|
|South Carolina||State Farm||All|
|South Dakota||Farmers||Period 1|
|Tennessee||Farmers Insurance||Period 1|
|Texas||Farmers Insurance||Period 1|
|Utah||Farmers Insurance||Period 1|
|West Virginia||Farmers||Period 1|
|West Virginia||State Farm||All|
|West Virginia||USAA||Period 1|
|Wisconsin||Farmers Insurance||Period 1|
Rideshare drivers and insurance: Many still lack coverage
Despite the possibility of being underinsured, many rideshare drivers don’t have enough coverage.
Here are some tips to ensure you have sufficient coverage:
- Review your personal policy, as well as what is offered by the ridesharing company, and be sure there are no gaps in coverage, especially during the time your app is on and you’re waiting for a customer to ask for a ride.
- Regardless of whether your ridesharing coverage applies to the entire time you’re on the job or not, you still must tell your personal insurance company that you are working for a ridesharing service, otherwise, you risk having your own policy canceled.
- Buy liability limits on your own policy as follows: $100,000 to pay for injuries to others in an accident you cause; $300,000 per accident; $100,000 to pay for damage to other cars and property
- Uninsured/underinsured motorist coverage is required in some states, and others allow you to reject it. Don’t. If you are in an accident and the other driver is at fault but doesn’t have car insurance, UIM covers your injury-related medical expenses and those of your passengers. It can cover your lost wages and pain and suffering. If the driver who hit you has insurance, but low limits, underinsured coverage will cover the difference. Choose coverage amounts that match your own liability limits.
— Satta Sarmah-Hightower contributed to this story.