Driving for a rideshare company like Uber and Lyft is one of the most popular side hustles out there. After a quick application process, you can start accepting rides through the easy-to-use app.
But there’s one topic all drivers must educate themselves about first: rideshare insurance.
When you drive for a rideshare company, you’re operating as an independent contractor and are essentially launching your own solo business. All businesses take on various forms of risk, and as a rideshare driver, you must be mindful of the damages and health expenses that can occur after getting in an accident.
Rideshare companies provide some level of insurance, but there are almost always gaps in coverage, experts say. “If someone is driving on behalf of Uber, they can experience periods where they aren’t covered,” says Charlie Wendland, head of claims at Branch insurance. “That’s a risk a lot of people aren’t aware of.”
The good news is that the insurance industry has evolved to keep up with the rideshare company boom, and drivers have more and better options for protecting themselves.
What Is Rideshare Insurance?
Rideshare insurance provides protection for rideshare drivers in the event of an accident or expenses associated with damage or healthcare costs. Some of these expenses are covered by rideshare companies’ own insurance policies, but others are not. Let’s break it down.
The insurance industry divides rideshare insurance coverage into three periods of time:
- Period 1 occurs when you have the app turned on but haven’t accepted a ride.
- Period 2 occurs when you’ve accepted a ride and are en route to pick up the rider.
- Period 3 occurs when you have the rider in your car.
Uber and Lyft have substantial coverage available during Periods 2 and 3. However, in many cases, Period 1 is very minimally covered. Period 1 is also not covered under a personal auto insurance policy, since being a driver for pay (sometimes called a livery driver), is a different category of insurance.
What Does Rideshare Insurance Cover?
Insurance companies have adapted to the rideshare world by adding affordable coverage that fills insurance gaps in Period 1 and beyond. This additional coverage is sometimes called a “rideshare endorsement” on a personal auto policy.
This addition to your policy extends coverages like liability, uninsured/underinsured motorist bodily injury, and even comprehensive and collision insurance into Period 1, the time period when you’re waiting for a ride through Uber or Lyft. Certain policies may also allow you to layer more coverage to lower your deductible on Periods 2 and 3 as well.
This additional rideshare coverage helps you avoid having gaps where you’re responsible for costs. One example is if you were driving around, waiting for a ride request on the app, and caused a fender bender. In that case, rideshare companies wouldn’t cover your expenses, and your own personal auto policy may deny your claim if they weren’t previously aware that you were driving for pay.
In the early days of the rideshare industry, you might have been blindsided by this responsibility, but now adding coverage to your personal policy isn’t as challenging. Still, you’ll want to do your research.
Talk to your insurance carrier and ask to speak to someone familiar with rideshare insurance who can tell you exactly what your rideshare add-on will cover — this will help you accurately compare coverages and premium costs.
“One thing that has changed is that there are a lot more options for drivers,” says Harry Campbell, CEO of The Rideshare Guy and an occasional rideshare driver himself. “Obviously, insurance is something you may not know you need until you need it, but you have to understand your potential liabilities and risks to make sure you are adequately covered.”
Another important distinction, Campbell says, is that delivery insurance is not the same thing as rideshare insurance, even though some companies may offer coverage for both. If you intend to work as a rideshare driver and a delivery driver, you need to ask what insurance your delivery company provides and what gaps you’ll need to fill.
How Much Does Rideshare Insurance Cost?
Like most kinds of insurance, you’ll find a wide range of costs for adding a rideshare endorsement to your policy. But these costs are becoming more affordable. If you are worried that the premium you’re quoted is too high, seek out at least two other quotes. You can also consider lower coverage limits that are still within what you would like to purchase, which can save you money.
There can also be additional costs when purchasing rideshare insurance. For instance, if you currently have state-minimum car insurance, then purchasing collision and comprehensive coverage will be necessary if you want to take advantage of contingent coverage from Uber and Lyft. In most cases, rideshare companies won’t insure your car at those higher levels for your work driving, unless you do the same for your personal auto policy.
Insurance for Uber Drivers
During Period 1, when you have the app turned on but haven’t accepted a ride, Uber offers some coverage for third-party liability, which means if someone other than you/your vehicle causes damages. They offer more third-party liability, uninsured/underinsured motorist bodily injury, and contingent comprehensive and collision coverage during Periods 2 and 3. The deductible is usually $2,500 for the comprehensive and collision coverage.
Uber drivers will need to disclose that they are driving for a rideshare company and get rideshare insurance on their personal car insurance to cover any accidents they cause during Period 1. Drivers may also want to get additional coverage during Periods 2 and 3, if the $2,500 deductible is too high. Finally, the contingent collision and comprehensive insurance only takes effect if you also have collision and comprehensive on your personal auto policy, so you’ll want to consider that level of coverage as well.
Insurance for Lyft Drivers
Lyft’s policies and Uber’s commercial auto insurance coverage are very similar both in broad strokes and levels of coverage. In both companies, the specific regulations in a given area could affect the insurance coverage available, and are subject to change. This is why drivers need to stay aware of the laws surrounding their rideshare business.
Lyft drivers should review the insurance available to them as well as the rideshare endorsement offered by their insurer.
How to Buy Rideshare Insurance
Most popular auto insurance companies now offer some kind of rideshare insurance endorsement, but if your current personal auto policy doesn’t offer one, feel free to shop around. You can request quotes directly from providers or through an insurance quote aggregator, and the process should be similar to shopping for general car insurance.
Certain new companies, such as Buckle, are offering specific coverages for rideshare drivers without doubling up on coverage. Keep in mind, however, that rideshare insurance is still a relatively new offering, and it will take a little patience to understand exactly what you need and where you can get it. The industry is changing in real time.
“There are insure-tech start-ups trying to drive innovation, to gear to more granular underwriting for one-off cars, but the problem they run into is there isn’t a lot of ridesharing specific data in the space to demonstrate to insurance companies what to charge and what losses to expect,” says Edward Walker, national micro mobility and shared economy practice leader at USI Insurance Services. “There’s a lot of development happening, just slowly, because of the availability of the data.”
Insurance for Uber and Lyft drivers has gotten more precise and drivers should be able to find flexible solutions that aren’t too expensive. If you are a rideshare driver, it’s important to make sure that you aren’t leaving yourself at risk by simply driving with a standard personal auto policy. Be sure to call your insurer and ask about your options and the insurance costs associated with rideshare driving before you turn on that app.