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Driving for a rideshare app is an easy way to earn, but without the right car insurance coverage when an accident occurs, all your earnings could go down the drain. If you want to avoid paying the actual cash value of damages out of pocket, you need gap insurance to fully protect yourself.
You may know that Uber insurance and Lyft insurance both provide plenty of coverage when you’re actively on a trip, with over $1 million of liability coverage, collision coverage up to your car’s value, and more. However, when you’re simply logged online and waiting for a request, you’re actually left with very little protection. During this time (known as the coverage gap), you only receive third-party liability coverage up to $50,000 per person, $100,000 per accident, and $25,000 for property damage — with no collision insurance for your own damages or injuries.
In the event of a total loss or severe accident caused by you or an underinsured motorist, the costs can be devastating for the majority of drivers.
If you want to avoid having your world turned upside down by an accident on the job, you’ll want to read this guide to learn how gap insurance can give you the auto coverage you need, as well as where you go to start your policy.
- What Is Gap Insurance?
- Do I Need Gap Insurance?
- How Much Does Gap Insurance Cost?
- Is Gap Insurance Worth It?
- 3 Best Gap Insurance Providers
- Frequently Asked Questions
What Is Gap Insurance?
Gap insurance is a type of rideshare insurance that provides drivers with greater protection during the coverage gap. It’s typically offered as an add-on policy that specifically kicks into action while you’re waiting for requests. However, some gap insurance policies will even help reduce high deductibles on your Uber or Lyft-provided collision insurance — which ranges from $1,000 to $2,500 — when you’re actively on a trip, too.
While you’re driving for your preferred app, gap insurance works in conjunction with your rideshare company’s auto insurance policy. As soon as you accept a trip, you’re covered by Uber or Lyft’s comprehensive insurance. As soon as you complete a drop-off, you’ll be protected by your gap policy instead. This constant switching ensures that your coverage is always at its max.
Do I Need Gap Insurance?
You’re already required to have a personal auto insurance policy if you drive with Uber or Lyft, so you may be wondering why gap insurance is still a must. First off, if you read the fine print, you’ll most likely find that driving for commercial use is not covered by your policy at all. This means that whenever you’re earning on the road, you risk being highly underinsured during the coverage gap.
When you’re faced with a bad car accident, the costs can be enormous. Without a gap policy, you’ll be left with the meager protection of your rideshare company’s policy, which you’ll find to be far from enough if hospital bills are involved. Not to mention, you won’t have any coverage for your own bills at all.
Unless your personal policy does happen to cover you while you’re ridesharing, we recommend gap insurance as a basic investment because it’s the easiest way to protect every payout you receive from your job.
How Much Does Gap Insurance Cost?
Gap insurance can cost as little as $10 per month. In most states, gap insurance is the most affordable type of rideshare insurance that car owners can find.
Because of the low cost of this add-on policy, there truly is no reason not to invest in this type of coverage, especially considering the thousands of dollars you could save if an accident were to occur.
Another perk of gap insurance? Because it’s solely used for your job, it’s often 100% tax deductible. We recommend confirming with your CPA before claiming the deduction, but your purchase will more than likely qualify, since it’s purely a job-related expense. This means what you’re paying may actually be even less by the end of each tax year.
Is Gap Insurance Worth it?
Even though gap insurance can be cheap, it may not make sense to get it. It only makes sense if you’re going to be in a situation where you could conceivably end up owing more on your car loan than your vehicle is worth.
This generally happens in situations where you put a small amount of money down on your auto purchase. It can also happen if you’re leasing your vehicle, which is why many lease contracts will require you to carry gap insurance (which you may have to purchase from the lender or buy from your insurance company, depending on the contract’s stipulations).
If you’re buying a used vehicle that’s already lost a lot of its value, then gap insurance probably isn’t necessary. It also isn’t necessary if you’re making a large down payment on the vehicle and will already have a healthy amount of equity in it before you’ve started making payments. To see your vehicle’s current value (or estimate its depreciated value) you can consult a resource such as Kelley Blue Book.
3 Best Gap Insurance Providers
Plenty of car insurance companies now provide rideshare coverage options, thanks to the huge growth in gig economy drivers over the years, but not every brand specifically offers gap insurance. When you simply want to fill in the coverage gap with an affordable add-on policy, these are three of the most popular providers that you can choose from:
Starting at just $10 per month, Allstate easily offers one of the most widely used rideshare insurance plans around. The Allstate Ride for Hire policy not only fills in the coverage gap, but it also lowers your deductibles to about $500 if you ever need to use Uber or Lyft’s contingent collision or comprehensive insurance.
Allstate’s gap insurance policy is now available in all states except for New York, though exact terms may vary based on where you’re located.
Progressive offers a simple gap insurance option that simply adds on a rideshare endorsement to any existing car insurance policy. With this endorsement, you’ll get full coverage anytime you’re waiting for requests — including comprehensive, collision, and uninsured/underinsured motorist coverage. Plus, Progressive will even support you with roadside assistance and rental car reimbursement when needed, no matter what stage of driving you’re in.
You can expect this add-on option to be more expensive than Allstate’s, but it’s convenient for drivers who are already using Progressive and is available in most states.
Travelers Insurance’s Limited Ride Sharing coverage endorsement works a lot like Progressive’s gap insurance option, just with slightly fewer features. When you buy this endorsement, you get the coverage you need solely added onto the time you’re waiting for requests.
Travelers rideshare insurance is only offered in Colorado and Illinois at the moment, but it’s a great affordable option if you’re in either of those states.
Frequently Asked Questions
For rideshare drivers, gap insurance policies are key to staying financially protected, so you can drive and earn without unnecessary stress. Read our answers to these common questions for more insight into gap coverage:
If I purchase gap insurance, will Uber or Lyft still provide some coverage between trips?
Once you have gap insurance coverage, Uber and Lyft will no longer cover you while you’re waiting for requests. When you’re between trips, Uber’s third-party liability insurance only applies if your personal coverage is less than what it offers, while Lyft’s insurance will only apply if your personal auto policy provider fails to respond. Neither of these will be the case once you have gap insurance.
Luckily, your gap insurance will provide ample coverage — far more than what you’d get through Uber or Lyft in the first place.
Can I get any discounts on rideshare insurance if I drive for Uber or Lyft?
Unfortunately, neither brand partners with any provider to offer discounts on rideshare insurance. You can expect to pay full price the policy you decide to take on. Luckily, as we mentioned before, gap policies tend to be low-cost options for any driver who wants extra coverage.
Do I need gap insurance if I have commercial insurance?
If you have commercial insurance (sometimes known as TLC insurance), there’s no need to purchase gap insurance. This is because commercial insurance will cover all the time you’re driving, including when you’re waiting for requests. However, it is almost always the more costly option, which is why most rideshare drivers prefer gap insurance unless commercial insurance is required, as is the case for Uber Black, Black SUV, and Uber Lux drivers, in addition to all on-demand drivers in New York City.
Add the Protection You Need
Gap insurance is a smart choice for any rideshare drivers who want to keep themselves protected while they’re on the road. This type of rideshare insurance will give you peace of mind for an extremely small investment — one that won’t hurt your wallet and is often tax deductible, too. If you ever get into a car accident while you’re waiting for requests, you can call your auto insurance company and be confident that you’ll be covered. This fact alone may make gap insurance worth the cost for you.
Of course, calling your car insurance company isn’t the first step you should take when you get into an accident on the job. Read our Uber accident guide to learn the key steps you need to take to stay safe and protect yourself from liability right after a collision occurs.
Brett Helling is the owner of Ridester.com. He has been a rideshare driver since early 2012, having completed hundreds of trips for companies including Uber, Lyft, and Postmates. In 2014 he acquired Ridester.com to share his experiences with other drivers. His insights are regularly quoted by publications such as Forbes, Vice, CNBC, and more. He is currently working on a book about working in the Gig Economy, expanding his skill set beyond the rideshare niche. Read more about Brett here.