Do I Need Certain Car Insurance To Drive for Lyft or Uber? 

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by admin

Without rideshare car insurance, a single accident can break the bank and your earning potential.

No boss, no schedule, and no time clock; these are just some of the perks of working as an independent contractor. These perks help explain why the gig economy, which includes independent workers like rideshare drivers, is booming, with a growth rate of 33% in 2020.

According to Pew Research Center, 16% of Americans have earned money from online gig platforms like DoorDash, Lyft, and Uber. And with the cost of vehicle ownership rising, ridesharing is becoming more popular for those who prefer avoiding car expenses.

But it’s not all sunshine and rainbows for those behind the wheel. Rideshare drivers are at risk when they’re on the clock. By default, personal auto insurance doesn’t offer coverage for commercial use of a car, like driving for ridesharing services.

This means if a rideshare driver gets into an accident while working, they effectively have no insurance coverage and can be on the hook for anywhere from a few thousand to millions of dollars.

Fortunately, rideshare car insurance helps bridge the coverage gap when rideshare drivers are most vulnerable.

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What Is Rideshare Car Insurance?

Rideshare car insurance is a car insurance policy that protects rideshare drivers from liability when they’re on the clock — when their personal insurance coverage doesn’t apply.

Unlike your personal auto insurance, rideshare car insurance is considered commercial insurance. However, unlike other commercial policies, rideshare car insurance is designed and intended for gig workers and independent contractors, so it’s generally easier to buy with more affordable premiums.

Most rideshare insurance policies are sold as additional add-ons, endorsements, or riders to your existing personal insurance coverage. Some insurers instead replace your existing policy with one that extends coverage to ridesharing. Other carriers offer standalone coverage, though that’s less common.

Do you need rideshare insurance if you have personal insurance coverage? 

Your personal auto insurance policy doesn’t cover you when you’re driving for a rideshare app. If you get into an accident while working — even if it’s as insignificant as a fender-bender — your personal coverage won’t pay out a dime.

Worse, your insurance provider can drop your coverage if you’re driving for a rideshare service without permission or rideshare insurance coverage.

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How Rideshare Insurance Works

Rideshare insurance covers you when your personal auto policy doesn’t: before coverage from your rideshare company, or transportation network company (TNC), kicks in fully.

In other words, rideshare car insurance covers the time when you’re working, but between pickups. This time represents a “coverage gap” in which your personal policy isn’t in force and the rideshare insurance coverage provided by your TNC is limited.

The National Association of Insurance Commissioners breaks down this time frame into three periods after an initial one in which you’re off the clock:

  • Period 0 – Offline: You’re not using a rideshare app or operating commercially and are covered by your personal car insurance policy.
  • Period 1 – Available: A rideshare app is active and you’re waiting for a ride request. Your employer or TNC provides liability coverage during this period.
  • Period 2 – En Route: You’ve accepted a request and are en route to pick up a passenger. Insurance coverage provided by your TNC is in full force during this period.
  • Period 3 – On Trip: You’ve picked up your passenger and are en route to the requested destination. Insurance coverage provided by your TNC is in full force during this period.

Period 1 is the time you’re most vulnerable and falling into the coverage gap between your personal auto policy and the insurance offered by your rideshare service. Rideshare car insurance bridges this gap so that you have protection during all four periods.

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What Does Rideshare Car Insurance Cover?

Though each state specifies its own minimum coverage requirements, auto insurance coverage can include:

  • Bodily injury liability (BIL): The costs associated with injuries sustained by another party.
  • Property damage liability (PDL): The cost of damages dealt to another party’s property.
  • Comprehensive: When your car is damaged or lost due to fire, natural disasters, theft, or vandalism.
  • Collision: Damage dealt to your car after an accident.
  • Uninsured/underinsured motorist: Coverage in the event your car sustains damage from a driver without insurance or with insufficient coverage limits.
  • Medical payment: Coverage to help pay for the medical bills of any driver or passengers.
  • Personal injury protection: Coverage for expenses incurred after an accident-related injury, such as lost wages or physical therapy.

Most rideshare insurance policies extend the coverage provided by your personal policy to cover your activity while operating a rideshare. In other words, if your personal car insurance doesn’t provide a certain type of coverage, your rideshare policy won’t, either.

Policies provided by rideshare services cover liability from bodily injury or property damage during Periods 1, 2, and 3. Personal rideshare car insurance can provide additional coverage that includes:

  • Collision
  • Comprehensive
  • Uninsured/underinsured motorist
  • Roadside assistance
  • Rental car reimbursement
  • Other coverages (depending on your personal auto insurance policy)

However, rideshare insurance coverage is limited to the driver and vehicle listed in the endorsement, as well as any passengers you pick up. It doesn’t cover any drivers or vehicles not listed within the endorsement or policy.

When is rideshare car insurance in force?

When you’re cruising down I-35 with the wind whipping through your hair and your music blasting (Period 0), you’re covered by your personal car insurance and whatever policy limits are set in place.

When you’re hanging out at your local Mickey D’s waiting for a ride request (Period 1), your TNC rideshare policy covers liability for damage done to another person or their property — and nothing more.

If you have a personal rideshare insurance policy, it protects against everything else, with your TNC policy providing primary coverage for liability.

When you’re en route to pick up a passenger or have one chilling in your backseat (Periods 2 and 3), your TNC coverage is in full force as the primary policy and provides liability and uninsured/underinsured motorist coverage. Your TNC rideshare policy will also provide collision and comprehensive coverage if your personal policy does as well.

In some cases, your own rideshare car insurance might provide secondary coverage beyond your TNC policy, and might even cover the cost of any primary coverage deductible.

What does rideshare insurance cover for Uber and Lyft drivers?

Lyft and Uber each provide a degree of rideshare insurance coverage, but their policies are limited.

Period Lyft Insurance Coverage Uber Insurance Coverage
Period 0 None None
Period 1 Third-party liability coverage*†:

  • $50,000/person BIL
  • $100,000/accident BIL
  • $25,000/accident PDL
Third-party liability coverage*†:

  • $50,000/person BIL
  • $100,000/accident BIL
  • $25,000/accident PDL
Periods 2 and 3 Third-party liability coverage*:

  • $1 million per incident

Uninsured/underinsured motorist:

  • Depends on state regulations

Comprehensive and collision coverage:

  • Contingent‡ up to the actual cash value of your car
  • $2,500 deductible
Third-party liability coverage*:

  • $1 million per incident

Uninsured/underinsured motorist:

  • Depends on state regulations

First-party injury:

  • Depends on state regulations

Comprehensive and collision coverage:

  • Contingent‡ up to the actual cash value of your car
  • $2,500§ deductible

Neither Lyft or Uber provides rental or roadside assistance. If you don’t maintain a personal rideshare insurance policy, you’re fully responsible for the cost of renting a vehicle or calling roadside assistance.

What rate can I get? What rate can I get?

How Much Does Rideshare Insurance Cost?

Like all insurance policies, rideshare car insurance rates depend on the type of coverage you buy and the coverage limits you need (which, in most cases, will match the coverage limits of your personal policy).

Endorsements or riders are usually more affordable than standalone policies. As a whole, rideshare car insurance is more affordable than commercial auto insurance policies since coverage is so specific.

Rideshare car insurance generally costs less than $100 per year. In some cases, a rideshare endorsement might cost the equivalent of a cup of coffee per month. Purchasing coverage isn’t going to break your bank — and might even save you from the financial headache of getting into a crash when you’re in the coverage gap.

To get the best bang for your buck, shop around and compare insurance quotes from popular rideshare insurance companies, such as:

  • Allstate
  • American Family
  • Farmers
  • Mercury
  • Progressive
  • State Farm
  • USAA

Consider contacting your current insurance agent, too. They might be able to work with you to add a rideshare endorsement to your current policy. It never hurts to ask for ways to save money on car insurance, either.

Can you refinance if you use your car for ridesharing?

Refinancing is a great way to save money on your auto loan, but there’s a catch: most lenders aren’t able or willing to refinance car loans if the vehicle is used for commercial purposes. It’s simply too much of a risk for most lenders to take on.

Fortunately, you’re not without options if you’re a rideshare driver looking to save a little cash. Create a budget and use some of your rideshare earnings to pay down debt faster, including your auto loan.

These methods might not translate to the same upfront savings that refinancing would give you, but they can still help you improve your credit score and overall financial situation.

Rideshare Car Insurance Protects Your Earning Potential

Ridesharing is a great way to supplement your income — or even replace the doldrums of full-time employment with the excitement of a self-directed role. But the dangers of getting into a costly crash can have a dramatic impact on your financial health.

And you can’t rely on the coverage provided by rideshare services alone. Though it’s great coverage to have when you’re picking up and transporting passengers, getting into an accident when you’re in the coverage gap can leave you without a car and on the hook for potentially tens of thousands of dollars in damages and medical bills.

Rideshare car insurance bridges that gap so you can focus on maximizing your rideshare earnings without the threat of compromising your ability to earn an income.

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