Uber and Lyft drivers have special needs when it comes to car insurance. Like virtually all drivers, they need to carry personal liability insurance, and they probably want to buy full coverage to protect against damage to their vehicles.
But because they use their cars to make money, they should consider buying ridesharing insurance or commercial insurance to supplement their personal policy. Although Uber and Lyft provide a good amount of coverage in most cases, drivers could find themselves uninsured or underinsured in certain situations, especially when they’re signed in to the ridesharing app and waiting for a fare.
If you’re a rideshare driver or thinking of becoming one, here’s what you need to know about insurance:
Is ridesharing legal?
Uber and Lyft are widely available across North America — and around the world — although the ridesharing services remain controversial in some places, partly because they compete with more highly regulated taxi services. Many state and local governments have approved or are considering regulations that affect ridesharing services, but in some places drivers may operate in a legal limbo. Uber currently advertises availability in more than 188 North American markets, while Lyft operates in 208 U.S. cities.
If you have any questions about whether ridesharing is legal where you live, make a few phone calls. Start with your city government or police department. Current rideshare drivers in your city might be another good resource. Ridesharing companies’ websites don’t always reflect recent court decisions.
What kind of insurance do drivers need?
Even if it’s legal for you to become a rideshare driver, your auto insurer might not like it. Unless you buy a special policy, your insurance company is unlikely to cover any expenses arising from accidents that occur when you’re driving for Uber or Lyft. Your insurer could even cancel your personal policy if it finds out you haven’t disclosed you work as a driver for one of the ridesharing services.
However, a growing number of companies are now offering ridesharing insurance programs to supplement coverage that Uber and Lyft provide. Typically, these special policies cost far less than the traditional commercial insurance a professional taxi driver would buy. The details vary, but generally these plans offer beefed-up protection during the coverage gap that occurs when the driver is signed in to the ridesharing app and waiting for a fare. Allstate, Erie, USAA, Progressive, Farmers, MetLife, Metromile and Geico all have ridesharing insurance policies available in at least some states.
If you can’t get ridesharing insurance as part of your personal policy, you’ll have to buy a commercial insurance policy to be fully protected. These plans have higher liability limits than a typical plan and may also cover rental reimbursement and other services. They’re also pricey. According to insurance agent group Trusted Choice, the average commercial policy for a passenger car costs from $1,200 to $2,400 per year, and some drivers have been quoted much higher rates.
What do Uber and Lyft cover?
Both Uber and Lyft provide up to $1 million in liability protection and other insurance benefits, at least while you’re carrying passengers. Here’s a look at the details:
| Company | Coverage limits with passengers/ after accepting a ride request |
Liability limits without passengers and before accepting a ride request | Comprehensive/ Collision |
Comprehensive/ Collision Deductible |
|---|---|---|---|---|
 |
$1 million liability per incident; $1 million uninsured/underinsured motorist per incident | $50,000 per person, $100,000 per incident, $25,000 property damage | $50,000 (applies only with passengers) | $1,000 |
 |
$1 million liability per incident; $1 million uninsured/underinsured motorist per incident | $50,000 per person, $100,000 per incident, $25,000 property damage | $50,000 (applies only with passengers) | $2,500 |
You may have more coverage, depending on state and city regulations.
Neither Uber nor Lyft will cover you if you’re not signed in to the app, which means you’ll still need a personal insurance policy, no matter what protections your ridesharing company offers.
What happens if you have an accident?
If you have an accident while you’re carrying passengers or on your way to a fare, Uber and Lyft will cover medical expenses and other damages up to $1 million, even if an uninsured or underinsured driver is involved. The $1 million limit is much higher than most drivers — even taxi drivers in many major cities — carry in liability coverage.
You can also draw on comprehensive and collision coverage offered by the ridesharing companies, as long as you also have such coverage on your personal insurance. Beware, though: Deductibles are high, and the policies apply only while you’re carrying passengers.
If you have an accident while waiting for a fare, you’ll need to file a claim with your insurance provider unless your state law or ridesharing endorsement specifies otherwise. If the claim is denied or you’re not fully reimbursed, coverage from Lyft and Uber will kick in. But ridesharing companies’ limits in these cases are relatively low. Ridesharing coverage from your personal insurance company is designed to cover this gap.
How to report an accident and file a claim
Whether or not your accident results from ridesharing, your first step should be to call the police. Depending on the type of accident and your ridesharing company’s rules, you might have to provide your personal proof of insurance or your company’s certificate. Exchange information with the other driver as you normally would.
Next, if you need to, file a claim with your personal insurer. Even if you can rely on your ridesharing company to cover your damage, your personal insurer will want to know about any accidents. This can put drivers who haven’t been honest about their employment status in a tough situation. If you choose not to tell your insurer, you risk being dropped anyway if the company finds out. You should notify your ridesharing company as well, even if it isn’t covering the accident. If you can take advantage of your ridesharing company’s coverage, a rep can help you start the claims process.
As insurance companies come to terms with ridesharing and issue new products accordingly, other companies are also seeing new opportunities. For example, benefit provider Peers offers a program called Keep Driving, which allows rideshare drivers to lease a car in their own name if their vehicle is in the shop.
Looking for supplementary coverage to give your ridesharing fuller protection? Try NerdWallet’s car insurance comparison tool to compare auto insurance quotes from top companies and find the most competitive rates around.
Image via iStock.
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