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Is your rideshare driver covered?

If you want to become an Uber or Lyft driver, your personal auto insurance alone won't provide enough coverage.

Personal auto insurance only covers your vehicle’s personal use. So, if you're using your car for business purposes to earn an income, you need to consider rideshare insurance.

Here's what you need to know about becoming a rideshare driver and how rideshare insurance can protect you and your vehicle while you're driving for one of these services.

Who's eligible to sign up for ridesharing?

Uber and Lyft both have different requirements for drivers.

Here are the minimum requirements for Uber:

  • You must be a licensed driver.
  • You must have an eligible four-door vehicle.
  • You must meet the minimum age to drive in your city, which in most cases is 16 years old.
  • You must have one year of licensed driving experience or three years of this experience if you're under age 23.
  • You must provide proof of residency in your city or state.
  • You must provide a driver profile photo in line with Uber's designated specifications.
  • You must undergo an online screening that includes a review of your driving record and criminal history.

    Lyft's minimum requirements:

    • You must be a licensed driver.
    • You must have an eligible four-door vehicle or get a four-door vehicle through Lyft's Express Drive rental car service.
    • You must meet the minimum age to drive in your city or region.
    • You must provide proof of your car insurance and registration.
    • You must undergo a criminal background check and a review of your driving history.

       

      How does rideshare insurance work?

      Rideshare insurance is additional auto insurance you purchase as an Uber on Lyft driver. This insurance covers vehicle damage to yours and other drivers and bodily injury to you or other drivers in the event of an accident. 

      Most rideshare insurance policies kick in once you turn on Uber or Lyft's app and begin accepting riders. Depending on your insurer, a policy might cover you from the time you start accepting rides through to when you pick up passengers and drop them off.

      Rideshare insurance is necessary. Your personal auto policy doesn't provide coverage when you drive for Uber or Lyft since there's considerably more risk to an insurer when you use your car for business purposes.

      "Personal lines auto insurance that people purchase are for individuals who use their automobiles for personal, non-commercial reasons. When a driver uses their car for business, in this case, transporting people, their personal lines policy will not provide coverage. A person who uses their car to run errands but also drives for a rideshare company needs two different policies," says Kelly Fogarty, head of insurance at Branch Insurance.

      Uber and Lyft offer additional insurance, which provides coverage in place of your personal auto policy when you drive for them. However, their insurance policies come with several coverage gaps, which could make you underinsured

       

      Rideshare insurance gaps

      There are different coverage periods when you drive for Uber or Lyft. They include:

      • Period 1: The app is on, but the driver is waiting for a passenger. During Period 1, rideshare companies provide limited liability coverage. This protection only covers damage to other vehicles and injuries to other motorists.
      • Period 2: The app is on the driver accepts a ride request and is on his or her way to pick up passengers. Uber and Lyft's insurance policies provide contingent comprehensive and collision coverage during this time.
      • Period 3: The app is on, a passenger is in the vehicle and the driver is transporting the passenger to his or her destination. Uber and Lyft's insurance policies provide comprehensive and collision coverage during this period until the end of the trip.

        Rideshare insurance is designed to supplement the insurance Uber and Lyft offer its drivers and to fill coverage gaps in these policies. 

        Both companies' insurance policies come with:

        • High deductibles that are $1,000 and $2,500, respectively. 
        • Low coverage limits of $100,000 of bodily injury coverage per accident
        • $25,000 of property damage coverage per accident
        • $1 million of third-party liability coverage, plus contingent comprehensive and collision coverage if you get into a covered accident
        • $50,000 of bodily injury per person 

          However, most insurance experts recommend:

          • $100,000 of bodily injury coverage per person
          • $300,000 of bodily injury coverage per accident 
          • $100,000 of property damage coverage

            Uber and Lyft's insurance coverage is considerably lower than these thresholds. Their liability coverage, in particular, could leave drivers with higher out-of-pocket expenses for potential car replacement costs, vehicle repairs and medical bills in the event of an accident.

            This is why you also need to consider getting rideshare coverage on your own -- either by adding an endorsement to your personal policy or by purchasing separate insurance, either of which comes with additional costs.

             
            Rideshare timeline and coverages
            Rideshare timelinePersonal auto insurancePersonal rideshare endorsementRideshare company (TNC) insurance
            Offline: App is off, personal driving

            Yes

            Personal auto insurance in effect

            Yes

            Some insurers have a rideshare endorsement for this period. Otherwise, coverage will continue under personal policy portion.

            No
            Period 1: Driver is online and available for hireNo

            Yes

            This is the riskiest period for drivers, so personal rideshare policies can help fill the gap.

            Yes

            Contingent liability coverage of 50/100/25

            Period 2: Driver accepts bid, en route to pick-up locationNo

            Yes

            Rideshare company insurance is primary, but some personal insurers have endorsements for this period.

            Yes

            $1 million liability, $1 million uninsured/underinsured motorist bodily injury, contingent collision and comprehensive up to actual cash value (Deductibles from $1,000 - $2,500)

            Period 3: Passenger in vehicleNo

            Yes

            Rideshare company insurance is primary, but some personal insurers have endorsements for this period.

            Yes

            $1 million liability, $1 million uninsured/underinsured motorist bodily injury, contingent collision and comprehensive up to actual cash value (Deductibles from $1,000 - $2,500)

            Return to Period 1: Passenger exitsNo

            Yes

            Reverts to Period 1 coverage 

            Yes

            Contingent liability coverage of 50/100/25

            Injury coverage explained

            As a rideshare passenger, you probably worry more about how quickly you’ll reach your destination than about reaching it safely. But what happens if you’re in an auto accident? Whose insurance covers you if you are injured as a passenger in a rideshare vehicle? If you’re involved in an incident as a passenger, it’s important to know what insurance information to obtain if you need to make a claim.

            Accident types

            Who is at fault

            Which insurance pays (and in what order) for your injuries

            Rideshare vehicle hit by another vehicle

            Other driver

            1. Other driver's auto insurance liability coverage

            2. Rideshare company's uninsured/ underinsured policy ($1 million limit if other driver is uninsured or underinsured)

            3. Rideshare company's personal injury protection (PIP) coverage (only in states required by law - limit varies by state requirements but is on par with levels required of limos or taxis in that area)

            Rideshare vehicle hits another vehicle or stationary object

            My driver

            1. Rideshare liability policy with $1 million limit per incident (for all injuries and damages resulting from the accident)

            2. Rideshare company's personal injury protection (PIP) coverage (only in states required by law - limit varies by state requirements but is on par with levels required of limos or taxis in that area)

            Just like an accident in your own car, collecting information is key. Using your smartphone, take photos of all drivers and vehicles involved, license plate numbers, how the cars sat after the accident, and anything else that seems significant (such as street signs of where it happened). 

            Obtain insurance information for both your rideshare driver and the other driver -- regardless of who you believe it at fault. If the accident is deemed the fault of the other driver and that driver is uninsured or underinsured, you may end up making a claim with rideshare company’s insurance provider.

            The National Association of Insurance Commissioners’ WreckCheck app on your phone is an excellent guide to asking the right questions and obtaining the necessary information after an accident. It isn’t built specifically for rideshare accidents, but it has a checklist and advice that can help if you’re in any type of auto accident.

            What you need to know about rideshare insurance

            Getting rideshare insurance is critical because, in most cases, it offers comprehensive coverage that can reduce your out-of-pocket costs in the event of an accident.

            Several insurance companies offer rideshare insurance, but the coverage often differs by insurer. 

            Here are three examples:

            • Geico offers coverage for all three periods. Its separate rideshare policy comes with a $250 deductible, which is significantly less than Uber's $1,000 deductible and Lyft's $2,500 deductible.
            • Farmers Insurance only offers coverage during Period 1, when the app is on and you haven't yet picked up a passenger. 
            • State Farm offers coverage for all three periods through an endorsement that's added to your personal auto policy. However, the endorsement means you'll pay between a 15 to 20% higher premium, the company says.

              Fogarty says it's important for rideshare drivers to carefully review policies from different insurers when looking for rideshare coverage.

              "When shopping for a policy, there are a few items that really matter. Of course, the price is always important. More importantly, make sure that you are getting the right coverage for your situation," she says. "Most personal lines policies exclude coverage any time that you are using your car for business -- like delivery or for transporting people for a fare. In some cases, you can purchase additional premium coverage for limited business use. Just make sure that the policy fits your situation."

              Fogarty says rideshare drivers also should do their due diligence if they plan to add an endorsement to their existing policy.

              "If your personal auto policy offers an endorsement for business usage, just check the language to see what is covered. Some companies offer an endorsement that only covers very limited situations," she says.

              Fogarty adds that drivers should be particularly mindful about coverage during the period when the app is turned on and they are on their way to pick up a passenger.

              "That stage is often not covered by their personal insurance policy or their commercial policy unless they have a specific endorsement. This is a gap that many rideshare drivers are not aware of that could lead them to find themselves without insurance coverage if they have an accident."

              Though driving for a rideshare company part-time or full-time could help you generate more income, make sure you weigh all these considerations -- and the additional insurance costs -- before signing up to drive for Uber and Lyft. By carefully doing your research and comparing the rideshare coverage that different insurers offer, you can get the insurance protection you need and substantially reduce your financial risks.

               Mark Vallet contributed to this report.

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