Ridesharing car insurance policies

While hailing a taxi or waiting for one to show up used to take some planning, it’s never been easier to get a ride to where you need to be — usually within minutes. Ridesharing companies like Uber and Lyft have 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.

It’s also become a popular occupation or side gig for many drivers. However, while driving for these rideshare companies can generate an income while controlling your schedule, being a rideshare driver comes with several car insurance considerations. Getting rideshare insurance is the most important. If you’re contemplating driving for Uber or Lyft, here’s what you need to know about rideshare insurance.

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Contents

Table of Contents

Table of Contents

• What is rideshare insurance?
• Why do you need a rideshare insurance endorsement?
• How does ridesharing insurance work?
• What does rideshare insurance cover?
• How much does rideshare insurance cost?
• Ridesharing insurance by state
• How to get enough ridesharing car insurance
• Which insurance companies offer rideshare insurance?
• Do delivery drivers need rideshare insurance?
• Final thoughts
• Resources & Methodology

What is rideshare insurance?

As a rideshare driver, you may be curious about how this gig affects your car insurance. It’s easy to presume that your current car insurance coverage protects your vehicle when you’re working. However, it’s more complex than that.

Most rideshare companies, such as Lyft and Uber, provide insurance coverage for their contracted drivers, but their insurance may not fully cover all incidents you could experience while working. This is where a rideshare insurance endorsement is essential.

Why do you need a rideshare insurance endorsement?

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 must have all the necessary insurance protections to safeguard your business.

However, a standard car insurance policy doesn’t cover rideshare drivers when they operate their vehicles beyond 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 on their way 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 coverage is so important. It can fill these coverage gaps and provide more insurance protection while 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 a 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. 

After Uber and Lyft 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 offer:

• Separate rideshare insurance policies; or
• Allow drivers to purchase gap insurance or add an endorsement to their 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 essential.

“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.

What does rideshare insurance cover?

Since rideshare companies have low liability limits and high deductibles and don’t cover your vehicle throughout your entire working period, rideshare insurance provides the extra coverage you may need.

This coverage can be added to your car insurance policy and typically covers collision, comprehensive, uninsured/underinsured motorist and can include roadside assistance, rental car reimbursement and other additional coverages. You may also receive a deductible reimbursement based on the difference between your policy’s deductible and the rideshare company’s insurance.

How much does rideshare insurance cost?

While rideshare insurance is typically more affordable monthly than regular car insurance premiums, it can still range from an average of $10 to $200 per month. How much rideshare insurance costs depends on the type of coverage you purchase.

For example, if you’re seeking medical, uninsured/underinsured motorists and comprehensive coverage to fill in the gaps of your policy, you could end up paying quite a bit more. State Farm’s add-on rideshare endorsement adds about 15% to 20% to a personal policy premium.

Ridesharing insurance by state

Allstate provides some reimbursement to help you cover the deductible for your claim through Uber or Lyft’s insurance. Drivers must weigh all these factors when choosing between rideshare policies.

Let’s look at the differences by company and state:

Note: Data is from 2020.

How to get enough ridesharing car insurance

Despite the possibility of being underinsured, many rideshare drivers don’t have enough coverage. Don’t presume that the rideshare company’s coverage plus your standard car insurance policy coverage is enough.

Here are some tips to ensure you have sufficient coverage:

• Review your personal policy. Look over what the rideshare company is offering and be sure there are no gaps in coverage, especially when your app is on and you’re waiting for a customer to ask for a ride.
• Talk to your insurance company. 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 policy canceled.
• Buy liability limits on your own policy. You should ensure you have the following limits on your car insurance policy: $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.
• Determine if you need uninsured/underinsured motorist coverage. This type of 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.

Which insurance companies offer rideshare insurance?

Not all insurance companies offer rideshare insurance, and those that do, have varying coverage limits and costs. However, most major insurers do offer rideshare insurance policies. If you don’t see yours on the list, contact your agent to see what they offer. You may have to shop around for policies if your current insurer doesn’t offer rideshare policies.

• Allstate: Allstate’s Ride for Hire program provides deductible gap coverage for rideshare drives up to $2,500.
• Farmers: You can learn more about Farmer’s rideshare endorsement, including its limits, cost and coverage options.
• Mercury: Rideshare insurance endorsement is available through Mercury and can be added to your policy.
• Progressive: This rideshare policy from Progressive provides gap coverage and provides a personal policy.
• State Farm: This reimbursement endorsement adds about 15% to 20% to a personal policy premium, but you may also qualify for discounts that can drop some of the cost.
• USAA: Rideshare coverage can be added to personal USAA car insurance policies, except in some states.

Do delivery drivers need rideshare insurance?

Yes, delivery drivers need rideshare insurance. Uber offers liability coverage to both rideshare and delivery drivers. While delivery drivers can get rideshare insurance, they can also get a commercial auto insurance policy or delivery driver insurance — both of which provide different coverage options based on the type of delivery services you are providing and what vehicle you’re driving.

Final thoughts

As a rideshare driver, you must have the proper insurance coverage limits. While your rideshare company provides liability coverage, it doesn’t cover every instance you may encounter while working. Adding rideshare insurance to your current policy can help you cover the gaps in coverage. It can also be affordable, based on the coverage amounts you need. Not all insurance companies offer coverage so you may need to shop around for the best policy for your budget and needs.

Resources & Methodology

Sources

1. Insurance Information Institution. “Ride-sharing and insurance: Q&A.” Accessed August 2024.
2. Progressive Insurance. “What is rideshare insurance?” Accessed August 2024.
3. Ramsey Solutions. “What is rideshare insurance and do you need it?” Accessed August 2024.
4. Uber. “Insurance to help protect you.” Accessed August 2024.
5. Allstate. “Allstate’s Ride for Hire program” Accessed August 2024.
6. Farmers. “Farmer’s rideshare endorsement” Accessed August 2024.
7. Mercury. “Rideshare insurance endorsement” Accessed August 2024.
8. Progressive “Rideshare policy from Progressive” Accessed August 2024.
9. USAA.”USAA car insurance policies” Accessed August 2024.
10. Uber. “Insurance requirements” Accessed August 2024.
11. Lyft. “Insurance coverage while driving with Lyft“

— Katrina Raenell contributed to this story.

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