Rideshare programs such as Uber and Lyft are growing in popularity as passengers enjoy a convenient and cost-effective way to get around, and drivers have a way to supplement their incomes while working flexible hours. If you have been considering driving for one of these companies, you will want to be sure that you are properly protected by adequate insurance coverage.
Rideshare insurance can seem a bit complicated, but it is not really that hard to understand.
Below are some frequently asked questions about this type of coverage to help you better understand your options.
- Do rideshare companies require their drivers to carry specialized insurance?
Each rideshare company has requirements for its drivers, and these can vary according to the city or state where the driver is operating. Drivers must typically be at least 21 years old, must have a valid drivers’ license, and must be operating a car that meets the state’s minimum requirements for vehicle age and safety. In all cases, drivers must provide proof of car insurance. However, specialized insurance through a rideshare endorsement or a specialized policy is not a requirement of Uber or Lyft.
- Don’t you get coverage through the company you work for?
Yes. You do.
Michael Albert is a driver for both Lyft and Uber in Chicago, and these companies provide him with a large amount of coverage while he is working. For example, Uber offers up to $1 million in coverage if he is in an accident while he has a paying passenger in his car, and up to $50,000 in coverage if he is in an accident while he is logged into the app and on his way to pick up a customer. Although this coverage comes with a high deductible, it offers him a large financial safety net in the event of a collision. Lyft offers similar coverage.
As a driver for one of these companies, this added insurance can compensate you not only for liability costs, but for damages to your car and injuries to you and your passengers so long as you are working at the time of the accident. A rideshare endorsement, or a specialized hybrid policy that covers you any time you are using your vehicle, can often eliminate the coverage gaps caused by these policies high deductibles, which can range from $1,000 to $2,500.
- Why is specialized insurance so important for rideshare drivers?
Some insurance companies do not want to cover rideshare drivers at all—though this has been changing as rideshare programs have been increasing in popularity. Others can drop your coverage if they discover that you have been working as a rideshare driver without having disclosed this information to them.
When Michael Albert signed up to work for Lyft and Uber, he spoke with his insurance agent to inform him that he was doing this job and to ensure that he was properly covered. His car insurance company was okay with this, though his agent made it clear to him, in writing, that his policy would not provide any coverage during the times that he had a paying passenger in his car. During those times, he must rely on the coverage offered by the rideshare company he works for.
It is worth noting that as his policy stands, when he is logged into the app and on his way to pick up a passenger, he is covered by both his insurance policy and the policy offered by Lyft or Uber, whichever he is driving for at the time.
Another option Michael could have taken was to add a rideshare endorsement to his auto policy. Unfortunately, in his case, that would have required him to change insurance companies and he did not want to do that. He feels comfortable with the coverage he has as it stands.
- I’ve heard that coverage options are improving for rideshare drivers. Is that true?
Yes. As rideshare programs have been growing in popularity, insurance companies have been adapting to meet the changing needs of their consumers.
Just a few short years ago, if rideshare drivers wanted to ensure that they had adequate coverage with insurance companies that would not drop them for doing this job, they needed to purchase commercial car insurance. However, these policies, which are not really designed for the specific needs of rideshare drivers, provided more coverage than they actually needed—at a cost that was higher than they ought to have been paying. Also, commercial insurance only covers drivers when they are using their vehicles for work, so a separate policy was needed to cover the car when it was being driven for personal use.
As time went on, a few insurance companies started allowing rideshare drivers to be covered, though their terms and conditions stated that they would not be covered while driving clients. This is the type of coverage Michael has.
Later, some providers started enabling customers to purchase policies supplemented with rideshare endorsements. Lyft and Uber drivers who wanted this extra coverage, or who wanted to ensure that they would not lose their coverage in the wake of an accident, typically had to switch to one of these carriers. This was often a hassle, and because many people earn discounts buy bundling their car insurance with other policies, such as home, renters, or life insurance, they needed to switch their other policies as well to avoid a financial loss.
Today, several major car insurance providers offer this specialized coverage and this makes things much easier for many rideshare drivers. One caveat, however: some states still do not have rideshare insurance-friendly legislation, so this coverage is not yet available to their residents.
Resources to check out:
- Geico’s New Rideshare Insurance Policy
- Best Auto Insurance Options for Rideshare Drivers [Nerdwallet]
- Is rideshare insurance available in my state?
As mentioned above, rideshare insurance is not yet available in all fifty states. A the time of this writing, rideshare policies are available in Washington D.C. and all states except:
- Massachusetts (though you may be able to purchase rideshare “gap coverage” here)
- New Hampshire
- New York
In another month or two, this list is likely to be outdated as policies become available in more states. The best way to find out if coverage is available to you is to contact your insurance company or a local insurance professional.
If your state does not offer rideshare insurance coverage, this does not mean you have no options. You can get a policy like the one Michael has, wherein you have coverage at all times except when there is a paying passenger in your car. You will still be covered by Uber or Lyft during those times, but you will have to cover the high deductible.
Furthermore, in Massachusetts, where rideshare coverage is not available, some insurers offer their customers rideshare gap coverage, which provides similar type of coverage. This is especially beneficial in this state because there are a high number of residents who utilize these services. The best thing to do is talk to your insurance agent to get recommendations about your options.
- What do specialized rideshare policies cover that regular policies do not?
Rideshare coverage can vary from one provider to another. Some insurers offer this coverage as an endorsement that is added to your current policy, while others provide it as a stand-alone hybrid policy that covers you both on and off the clock. Policies can also differ in other ways. For example, some may only cover drivers for Lyft, some only for Uber, and some for both. Some provide the same coverage at all times, while others provide extra coverage while you are driving passengers,
The most beneficial coverage you get is for damages caused by minor accidents. If you are driving a passenger and are in a minor fender-bender, you may not experience damages in an amount that exceeds the high deductible that goes along with the coverage offered by your rideshare company. If you have an exclusionary policy like Michael does, you will not have any coverage at this time regardless. However, if you have a rideshare endorsement or hybrid policy, your car insurance can cover these damages.
- Is rideshare insurance expensive?
Rideshare coverage as an endorsement on your already existing auto insurance policy or as a hybrid policy to replace your current coverage will not result in a significant increase in your premium costs. This added coverage can cost policy-holders an additional $6 to $20 per month depending on the number of miles you drive, your driving record, the amount of coverage you are purchasing, and the insurance company you choose. This is a rather small price to pay for the peace-of-mind this added coverage can afford you.
Any time you are purchasing insurance, it is a good idea to shop around and see the options that you have available to you before making a decision about your coverage.
- Is a minimum coverage policy with a rideshare endorsement enough coverage?
You may be thinking that because of the extra coverage you get through Lyft or Uber while you are working, a minimum coverage auto insurance policy should offer sufficient protection. While it is true that a policy that meets your state’s minimum insurance mandates is legal and meets the requirements of Uber or Lyft, it may not be the best idea if you rely on your car for income.
For example, if you are at fault for an accident that severely damages your car while at a time when you are not working, you will not be covered unless your policy includes collision insurance. If a windstorm causes a large tree to fall over and it lands on your car, you will not be covered unless you have comprehensive insurance. If an uninsured driver causes severe damage to your car, you will need to sue for compensation related and may find it difficult or impossible to collect payment—unless, that is, you have uninsured motorists coverage (which is only required in a handful of states). In all of these cases, you will find yourself facing the high cost of repairing or replacing your vehicle, which is a hassle at best. As a rideshare driver, can be especially troubling since you will also lack the means of making the extra money you will need to cover these costs.
This is why most rideshare drivers opt to beef up the coverage for their vehicles by including optional coverage and high coverage limits.
Get Covered and Get Driving!
Now that you know how rideshare insurance works, you can work with an insurance agent to get a policy that works best for you. Best wishes for happy driving and interesting conversations with the many people you’ll meet while working as a rideshare driver.