Unless you work for an insurance company or law firm, insurance is a topic that probably fills you with either boredom or dread. But if you’re going to be in the rideshare business, you need to understand the basics of how auto insurance and Lyft insurance work, if only to make sure that you have adequate coverage.
To make things easy, we’ve broken down everything you need to know about Lyft insurance for a driver and condensed it into the following guide.
Minimum Insurance Requirements to Be a Lyft Driver
Before we get into the nitty gritty of policy details and coverage, we should note that Lyft requires all drivers to have the minimum auto insurance mandated by their state. Proof of insurance is one of the documents you’ll need to provide as part of your Lyft application.
As we’ll see, however, the coverage that your personal insurance provides will not protect you when you’re driving with Lyft. For this reason, you need to know what coverage Lyft provides (and if it will be enough if you’re involved in an accident).
What Coverage Does Lyft Insurance Provide?
Luckily for drivers, Lyft does provide insurance to cover liability, injuries and certain other types of damage to your vehicle. However, the extent of this coverage depends on what you’re doing at the time of the accident. Lyft (and most insurance companies) divide the rideshare process into different “phases” to determine when this coverage applies. Let’s look at each phase in more detail.
During Period 0, the driver app is off. In this scenario, your personal insurance covers your vehicle, since you’re not using it for commercial purposes. There is no need to have special insurance for this period of time, even if you’re on your way to begin your rideshare shift.
This period of time is often known as the “coverage gap.” It’s any time when you’ve turned the Lyft app on but aren’t in the process of picking up a passenger or transporting them. During this time, you’re the most vulnerable when it comes to insurance. Your personal auto insurance will not cover you; by their definition, you’re using your car as a commercial vehicle, so your personal policy does not apply.
But will the Lyft insurance coverage protect you since you’re on the job? Lyft’s insurance policy information reveals that while you do receive some coverage in this period, it’s minimal compared to what you begin to receive once you’ve picked up a passenger. It’s also much less than what you’ll receive under your personal car insurance.
What will Lyft insurance cover during this period? According to their website, “when the app is in driver mode before you’ve received a ride request,” you will receive Lyft’s “contingent liability coverage.” What does this mean? Barring any state or local laws that require Lyft to do otherwise, the liability coverage you’ll receive in this situation is as follows:
- $50,000 maximum limit per person – This is the maximum amount that Lyft will pay for one person’s injuries. This means that if, for example, you strike the back of a car and injure two passengers, Lyft will only cover up to $50,000 in medical expenses for each person. Any additional expenses will be your responsibility.
- $100,000 maximum limit per accident – This is the maximum amount Lyft will pay for any liability expenses that result from an accident that occurs during Period 1. You’re responsible for all expenses beyond this amount.
- $25,000 maximum limit for property damage – If you’re involved in an accident that causes damage to someone else’s car, Lyft will pay up to $25,000 to cover the damage. The $100,000 maximum limit includes this amount.
- No deductible – You do not have to meet a deductible to receive any of this coverage.
We know these numbers sound like a lot, but in the world of liability insurance they’re actually quite small. Medical bills can easily run into the hundreds of thousands of dollars to treat serious injuries, and it’s impossible to know how much someone’s vehicle could be worth — if you have an accident with a luxury vehicle, for example, this policy may not cover all the damages.
Furthermore, the Lyft insurance policy only covers liability. It doesn’t cover any expenses you incur to treat injuries you sustain as the result of a crash or to repair damages to your vehicle. You could also face an inability to earn an income if the injuries restrict you from driving or doing any other kind of work.
Because of this, we strongly recommend that you purchase additional car insurance coverage to protect yourself during the policy gap. Many insurance providers now offer a specific rideshare policy that you can add to your auto policy or purchase separately.
The cost for rideshare insurance can often be as little as a few dollars a month, particularly if you bundle the policy with existing insurance. This is a small price to pay for the peace of mind that comes from knowing you’re protected in the event of an accident.
It’s also a major improvement over the way things were a few years ago, when your only option was to purchase expensive commercial insurance that often provided more coverage than rideshare drivers needed.
During Period 2, you’ve accepted the ride and are on your way to pick up the passenger. Once you enter Period 2, the amount of coverage provided by Lyft insurance increases dramatically.
Here is the coverage you receive from Lyft during Period 2:
- Primary liability insurance – Lyft will cover any liability up to $1 million per accident. This includes damage to someone else’s vehicle and injuries to someone else. There is no deductible for this insurance.
- Contingent collision coverage – This insurance covers “physical damage to your vehicle resulting from an accident.” There is one important condition, however. In order to receive this coverage, you must already have collision coverage on your personal auto insurance policy. This policy has a $2,500 deductible and will cover either the actual cash value of your vehicle or the cost of repairs, whichever is lower. This policy will cover you regardless of whether or not you’re at fault for the accident.
- Contingent comprehensive coverage – This additional coverage will pay for “physical damage to your vehicle resulting from a non-collision event.” Examples on Lyft’s website include “fire, vandalism, a natural disaster.” It has the same condition as Lyft’s contingent collision coverage: You’ll already need collision coverage on your personal auto policy in order to qualify. This policy also has a $2,500 deductible and will cover either the actual cash value of your vehicle or the cost of repairs, whichever is lower. It also applies whether or not you’re at fault.
- UM/UIM coverage – UM/UIM stands for “uninsured/underinsured motorist.” This policy provides up to $1 million per accident in the event of an accident with a driver who is “uninsured or underinsured and is ultimately at fault for bodily injury caused to you and/or your passengers.” There is no deductible for this policy.
Period 3 covers the time when you have picked up the passenger to when you drop them off at their destination. All coverage in Period 2 also covers you and your passenger during this time.
Exceptions for Specific States and Situations
We should note that, at the time of publication, the Lyft insurance policy applies in all U.S. states, “except for those rides originating in New York City with a TLC (Taxi and Limousine Commission) driver.” Just to be safe, Lyft also says, “Some regions may have specific requirements that modify the described coverage.”
After all, insurance is a complex topic, with requirements and regulations varying from state to state. Because of this, always do your own research to see what type of insurance coverage is required for your situation. You can speak to your insurance company about this, as well as using an online third-party tool to compare rates for different insurance providers.
Better Insured Than Sorry
Lyft insurance can be a confusing topic, but we hope you now have a better understanding of what kind of coverage you receive while you’re driving with Lyft. We also hope you understand the importance of rideshare insurance as a means to protect yourself against financial hardship.