Do You Need Special or Extra Insurance to Drive Uber & Lyft?

Do You Need Special or Extra Insurance to Drive Uber & Lyft?

It seems like every car parked in front of your work has either the black Uber or the pink Lyft sticker (or both) on its windshield. Becoming a rideshare driver is at the top of the list these days as a means of obtaining supplemental income. But what are the risks associated with this side gig? Since you use your own vehicle, is private insurance sufficient?

Do you need special or extra insurance to drive Uber and Lyft? You do not need special or extra insurance to drive Uber and Lyft. As long as you have a personal auto insurance plan, Uber and Lyft will provide additional coverage to its drivers for incidents that take place while providing passenger service for their company.

Although a special rideshare plan does not have to be purchased prior to applying at Uber and Lyft, it does not necessarily mean the prospective driver is “good to go” as far as auto coverage is concerned. It is important to have a thorough understanding of auto insurance policies and what incidents may need to be covered before putting your car up for hire.

What Kind of Insurance Should Uber and Lyft Drivers Have?

Most states require a minimum level of auto insurance before a person can legally operate a motor vehicle. Some common forms of auto coverage, as listed by Allstate, can include:

  • Liability coverage
  • Uninsured and underinsured motorist coverage
  • Comprehensive coverage
  • Collision coverage
  • Medical payments coverage
  • Personal injury protection

This is where the idea of “special” or “extra” insurance may become confusing for the prospective rideshare driver. Although you carry the minimum auto coverage required by law in your state, it may not be enough to sufficiently cover your vehicle from the added risk it will be exposed to as an Uber or Lyft driver.

Liability Coverage

Liability coverage is what motorists carry to ensure that they have the minimum auto insurance required by law. If the motorist is at fault in an auto accident, liability coverage will usually pay for the following:

  • Damages caused to the other party’s vehicle
  • Medical expenses accrued by the other party
  • Replacement or repair of the other party’s personal property as a result of the accident

Usually and may are emphasized in regard to auto coverage because each unique policy will have exceptions, exclusions, and provisions that can limit or extend coverage. It is incumbent upon the policyholder to be aware of the fine print in his or her policy prior to applying at Uber or Lyft.

Some hypothetical scenarios in which liability coverage would usually kick in include:

  • The motorist runs a stop sign and t-bones a crossing vehicle. Liability coverage would pay for the innocent party to have his or her car fixed, as well as cover any applicable medical expenses incurred.
  • The motorist is speeding through a residential area and knocks the mirror off of a parked vehicle. Liability coverage would pay to have the mirror fixed.
  • The motorist backs into a building while trying to park. Liability coverage would pay to have any damages to the building repaired.

Liability coverage minimums were put in place to protect innocent parties against motor vehicle infractions. As such, liability coverage does not cover any damages caused to the offending motorist’s property or his or her personal injuries.

It is common to see a figure such as “50/100” when looking at liability coverage. This is shorthand for the amount of protection provided by the policy. In this case, the “50” could stand for $50,000 worth of personal property coverage, while the “100” could stand for $100,000 worth of medical expenses coverage. The minimum required by law varies from state to state.

It is important for the prospective Uber or Lyft driver to note that an auto insurance policy offering only liability coverage is not recommended to start working as a rideshare driver.

As liability coverage is the absolute minimum insurance that a motorist can carry, it is common for most vehicle owners to carry policies that offer more thorough coverage for their personal protection. Since rideshare drivers will be out and about much more than the average motorist, they would do well to follow this example. 

Uninsured or Underinsured Motorist Coverage

Sadly, there are some people who take an “I’ll never get into an accident” attitude or, worse, just have a blatant disregard for the laws put in place to protect motorists and choose to drive without auto insurance.

If you were carrying only liability coverage and were to be hit by such an offending driver, the financial ramifications could be scary.

That’s where uninsured or underinsured motorist coverage comes in. This type of coverage is required by law in some, but not all, states.

Uninsured Motorist Coverage

Uninsured motorist coverage is pretty self-explanatory. If you were to be the victim of an auto accident caused by an uninsured driver, your insurance would usually kick in and cover damages to your vehicle and foot the bill for any medical expenses caused by the accident.

Underinsured Motorist Coverage

Underinsured motorist coverage would usually kick in when a major accident takes place. It kicks in where the offending party’s coverage stops short. For example, if an offending motorist carrying the minimum liability coverage were to get into an accident with a multi-passenger vehicle, his or her liability coverage may cap at a figure short of total medical expenses.

While uninsured and underinsured motorist coverage offers an added layer of protection above liability coverage, it is probably not sufficient protection for Uber or Lyft drivers.

Comprehensive Coverage

Comprehensive coverage, on top of liability and uninsured/underinsured motorist, provides a high level of peace of mind to drivers that they will be covered in a variety of situations. As such, this is the level of coverage that most motorists prefer to carry and is highly recommended to drive Uber and Lyft.

Comprehensive coverage will protect the motorist if their vehicle is damaged during one of those “freak” accidents that don’t arise while on the road. A few of the scenarios usually covered by comprehensive coverage may include:

  • Hail damage
  • Theft or vandalism
  • Flooding
  • Hit and run (some policies may lump this under uninsured driver)

This type of coverage usually comes with a deductible, meaning that the policyholder will have to pay a preliminary amount; usually, something like $100, $500, or $1,000, before insurance will apply.

Insurance will then usually pay for all repairs related to the accident, up to the actual cash value of the car. If the actual cash value of the car is reached and it would cost more to fix the car than the car is worth, the car is said to be totaled, and insurance will write the policyholder a check in the amount of the cash value of the car.

While comprehensive coverage is typically not required by law in most localities, it is a highly recommended coverage to protect motorists from life’s unforeseen circumstances and should be carried by those interested in driving for Uber and Lyft.

Collision Coverage

Collision coverage protects the motorist in the event of damage to his or her vehicle as a result of a single-vehicle accident where no outside party suffers a loss. Some examples of where collision coverage would usually apply to include:

  • Hitting wildlife
  • Rolling a car into a ditch
  • Driving into a pothole

Like comprehensive coverage, collision coverage usually includes a deductible, after which insurance will usually pay for towing, repair, and rental expenses up to the cash value of the damaged vehicle.

This type of coverage is typically not required by law but should be carried by those interested in driving for Uber and Lyft.

Medical Payments Coverage

Medical payments coverage protects the motorist and his or her passengers in the event that medical expenses arising from a collision. For example, a driver rolls her truck and all passengers need medical attention. These payments may include things such as:

  • Ambulance rides
  • Flight for life
  • X-rays
  • Surgeries
  • Hospital stays

This type of coverage is not required in all states, but like comprehensive and collision coverage, it is an excellent idea for Uber and Lyft drivers.

Personal Injury Protection

Personal injury protection is a lot like medical payments coverage, only much more comprehensive. Personal injury protection may help pay for medical expenses arising from an accident, as well as provide coverage for some of the following scenarios:

  • Childcare while the motorist is incapacitated
  • Lost wages while the motorist is unable to work
  • Transportation and other services to help motorist during convalescence

Personal injury protection is not offered in all states and, as such, is not required by law. While it is not highly recommended that Uber and Lyft drivers carry this type of coverage, more coverage is never a bad idea, especially if an accident driving Uber or Lyft may impact the driver’s ability to perform his or her primary job or daily responsibilities.

What Type of Insurance Do Uber and Lyft Provide?

Okay, so I have an excellent insurance plan covering my personal vehicle and am ready to apply to be a rideshare driver. What kind of additional coverage do Uber and Lyft provide their partners?

Coverage will vary, depending on which of the following situations the incident occurs under:

  • Offline or off the app
  • Available or waiting for a ride request
  • En route to pick up riders and during trips

It is important to be aware of your status within the app to ensure that you have a complete understanding of whether your personal insurance provider or the ridesharing service will foot the bill for a covered accident.

Offline or Off the App

When the rideshare driver is not “on the clock” or actively logged into the rideshare app, his or her personal insurance plan will apply in the event of an incident. This is important to note for rideshare drivers carrying minimum coverage and who don’t log in to work with great frequency.

Since Uber and Lyft’s supplemental insurance only applies to drivers actively logged into the app, it is important to have an auto insurance policy with which the rideshare partner is comfortable for using his or her vehicle on personal time.

Available or Waiting for a Ride Request

If you are logged in and waiting to get assigned to a ride, Uber and Lyft will provide additional third-party liability coverage, in the event that your personal insurance doesn’t apply, for a covered accident in the following amounts:

  • $50,000 in bodily injury per person
  • $100,000 in bodily injury per accident
  • $25,000 in property damage per accident

This is the scenario that is the most confusing for prospective Uber and Lyft drivers and can get those who carry only the minimum liability coverage into their rideshare foray into the most trouble. In fact, Lyft refers to this as the “coverage gap.”

While $50,000, $100,000, and $25,000 look like big numbers and may provide a level of comfort to those looking to partner with a rideshare service, they come with some major caveats. Let’s look at some of the red flags surrounding the coverage of this scenario and why Lyft refers to it as the “coverage gap”:

  1. Third-party liability coverage is all that is offered here. And this only occurs if your personal plan doesn’t apply or is not sufficient. Essentially, the only way Uber or Lyft insurance will payout is if the damage is done to someone else and you can’t pay with your own insurance. The driver would not be covered.
  2. The coverage limits are not as high as they seem. When dealing with ambulance rides, surgeries, and hospital stays, $100,000 can be eaten up very quickly, especially if the third party was a vehicle containing multiple people needing medical attention.
  3. It doesn’t account for the amount of time a driver will spend waiting for a ride. On slow nights, it’s reasonable to think that rideshare drivers could spend the majority of their time logged into the app but not getting any ride requests. They are still out and about, at risk for an incident, but because they aren’t getting passengers, the coverage offered by Uber and Lyft is minimal.

This “coverage gap” scenario best demonstrates that while it is not required for Uber and Lyft drivers to purchase extra or special insurance, it is highly recommended that they get something much more thorough than the minimum liability coverage.

What Can Happen During a Rideshare Drivers Coverage Gap?

Keep in mind that being a rideshare driver significantly increases time in your car, which, in turn, increases the chances that an incident could happen.

The following are some examples of incidents that could feasibly occur during the “coverage gap” period for which the driver would not be covered under rideshare insurance:

  • While waiting for a passenger to request a ride, the driver decides to run to the gas station and refuel. While at the pump, another patron, who does not have insurance, backs into the rideshare driver’s car, knocking off the bumper.
  • During a particularly slow shift in the suburbs, the driver decides to head downtown to see if there is more action. The driver blows a tire on the interstate and needs a tow.
  • On a snowy evening, the driver slides while going around a corner and skids into a light pole, causing significant damage to the driver’s side rear door.

These are just a few of the many possible uncovered accidents Uber and Lyft drivers may encounter while logged into the app and waiting. Clearly, it is highly recommended that their personal auto insurance plans have strong comprehensive and collision coverage. 

En Route to Pick Up Drivers and During Trips

Uber and Lyft offer extended coverage for their partners when they are on their way to fulfill a request or have passengers in their vehicles. The coverage includes:

  • $1,000,000 in third-party liability
  • Uninsured or underinsured motorist bodily injury
  • Contingent comprehensive and collision

While Uber and Lyft provide better coverage for their partners during the process of a trip, the comprehensive coverage is contingent, meaning that they will offer their coverage only if the driver already has his or her own coverage.

Then, in the event that an accident were to occur, the driver would have the option of using Uber or Lyft’s insurance, but a $1,000 deductible would apply.

In this scenario, the added liability and bodily injury protection are certainly helpful, but the comprehensive and collision coverage is unlikely to be better than what the rideshare driver has already. Thus, this coverage should not be looked at as a replacement for a solid personal auto insurance plan.

What If My Personal Insurance Doesn’t Pay?

Some prospective Uber and Lyft drivers may have an amazing personal auto insurance policy, but when they look at the fine print when filing a claim, they may see one of the following heart-stopping provisions:

  • Excludes accidents that occur when the vehicle is being used for business
  • Limited to personal vehicles only
  • Void if the loss is suffered while the vehicle is in use for ridesharing

As the popularity of ridesharing has increased, so have the number of insurance claims filed as a result of ridesharing accidents. As insurance companies look to reduce the amount of money they are paying out, they are becoming increasingly likely to make sure that ridesharing exclusions are included in the policies they issue.

This can create some ugly insurance battles for partners. Much like personal health insurance versus workers’ compensation, personal auto insurance versus rideshare insurance can result in a lot of finger-pointing as to who is responsible for signing the check, with the rideshare partner often getting caught out in the cold.

To help protect rideshare drivers in these situations, many insurance providers, like Allstate, are offering special rideshare options for those interested in driving for Uber and Lyft. Some of the options prospective drivers may consider include:

  • Adding a rideshare endorsement to an existing plan
  • A combined business and personal plan
  • Extra “coverage gap” protection
  • Deductible gap assistance

Adding a Rideshare Endorsement to An Existing Plan

This is a relatively cheap option to enhance the personal auto insurance plan of an Uber or Lyft driver. If a prospective rideshare driver has a policy that will not cover accidents that occur while working for Uber or Lyft, for about $15 per month, a rideshare endorsement can be purchased that will usually extend the driver’s personal coverage to ridesharing services.

Combined Business and Personal Plan

This is likely to be the most expensive option for prospective rideshare drivers, but also the most comprehensive. Simply put, the driver would purchase an all-inclusive insurance plan for his or her vehicle, with any and all damages or personal injuries that occur to and from the use of the vehicle to be covered, regardless of how the vehicle was to be used.

Extra “Coverage Gap” Protection

The dreaded “coverage gap” for rideshare drivers, the time when they’re logged into the app but not actively assigned to a job, is the most likely scenario in which neither personal insurance nor rideshare insurance will want to pay for damages. Rather than purchase a combined plan or rideshare endorsement, drivers may opt to purchase a policy rider that covers them if an accident were to occur in the time they are waiting for a trip assignment. 

Deductible Gap Assistance

For both personal insurance and coverage provided by rideshare services, the deductible for comprehensive and collision coverage can be prohibitive. For a minimal cost, rideshare drivers may elect to purchase deductible gap assistance, which will help mitigate the cost of the deductible if comprehensive or collision insurance needs to be used.

Other Benefits to Special Rideshare Insurance

If you have ever ridden in an Uber or Lyft, you have probably heard a few unsavory stories from some of your drivers. All rideshare drivers, and especially those who rely on their vehicle to earn a significant portion of their income, should consider special rideshare insurance to protect against some of the following situations:

  • The driver becomes unable to work as a result of a ridesharing accident
  • The driver needs to obtain a rental car to continue working
  • Riders cause damage to the vehicle’s interior

While many of these benefits are usually provided to motorists who have personal injury protection included in their personal auto insurance plans, they may not be extended if damages are incurred during an Uber or Lyft ride. Uber offers driver benefits to its partners relatively cheaply through Aon.  

Unable to Work As a Result of Ridesharing Accident

If the driver cannot log into the app and complete trips, he or she cannot make money. Rideshare coverage can usually provide disability payments to drivers while they are unable to work.

Need a Rental Car to Continue Working

If the driver is in a ridesharing accident that will leave him or her without a vehicle for a significant period of time, rideshare coverage will usually pay for a rental car while the driver continues to drive for Uber or Lyft.

Riders Cause Damage to the Vehicle’s Interior

Uber and Lyft drivers are no strangers to passengers unexpectedly vomiting, smoking, or otherwise damaging their vehicles during rides. While riders who commit any of these infractions have fines levied against them in the app, it is not uncommon for credit cards to be canceled when they see these charges. Rideshare insurance can usually help ensure that drivers don’t have to go out of pocket for these cleanings and repairs.

In Short, What Should Uber and Lyft Drivers Do About Insurance?

You do not need special or extra insurance to drive Uber and Lyft. As long as you have the minimum essential personal coverage as specified by state law, you are eligible to be an Uber and Lyft driver, and they will extend supplemental coverage to their driving partners.

However, although you have the minimum auto coverage as specified by state law and are “qualified” to put your vehicle up for hire, you are not necessarily in a good position to be an Uber or Lyft driver for the following reasons:

  • Minimum liability coverage does not provide much protection against the array of accidents that can occur to a vehicle
  • Ridesharing will dramatically increase your time in your vehicle, making a potential incident more likely
  • The coverage Uber and Lyft extends to its partners does not offer much protection other than additional liability coverage
  • Many personal auto insurance plans will not pay out for accidents that occur while working as a rideshare driver
  • Special rideshare insurance can be purchased relatively cheaply when considering the increased time the vehicle will be on the road and will provide the driver with an additional safety net in the event that his or her personal insurance and/or Uber and Lyft are unwilling to pay out on a claim

While a prospective Uber and Lyft driver can get started with minimum liability coverage, it is highly recommended that rideshare drivers have thorough auto insurance plans that include the following:

  • Comprehensive coverage
  • Collision coverage
  • Medical payments coverage
  • Special rideshare endorsements or additional rideshare provisions

Dan Ferrantelli

I'm Dan Ferrantelli. I discovered rideshare through my wife and daughter who used the service a full year before I decided to try it. Now I am a part-time Uber & Lyft driver and love sharing my experiences with others. I'm also an entrepreneur who has developed several businesses and I have a passion to write! I hope you enjoy the articles I post. Kind feedback is always welcome.

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