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Rideshare Insurance for Uber Driver

The popularity of ride-sharing platforms such as Uber and Lyft has created new challenges for auto insurance companies.

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With more than two million drivers sharing their vehicles each day, new insurance policies had to be created to meet their needs. Rideshare insurance is a new type of policy designed to offer Uber and Lyft drivers financial protection against car accidents. It complements coverage from commercial insurance policies offered by ride-sharing companies that, while robust, do not cover drivers at all times.

In this article, we explain what is a rideshare insurance policy and why drivers should have one when working for a ride-sharing company.

What is rideshare insurance?

Rideshare insurance is a type of auto insurance for people who use their vehicles to drive for ride-sharing companies such as Uber or Lyft. Rideshare insurance was created to help drivers stay protected from unexpected events that are usually not covered by personal auto insurance and commercial insurance provided by ride-sharing companies. Rideshare insurance is usually sold as an additional component of personal auto insurance rather than as a separate policy.

Rideshare insurance is not a requirement to drive for a ridesharing platform like Uber or Lyft. Instead, it is an available resource drivers can rely on to protect themselves and their vehicles from considerable financial losses that often follow a car accident. In general, coverage from rideshare insurance policies protects drivers from vehicle or property damage, as well as medical expenses related to bodily injuries to other people. This coverage comes into effect when drivers are not carrying passengers.

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Why drivers need rideshare insurance?

Rideshare insurance is necessary for two reasons. First, most personal auto insurance policies do not cover accidents related to commercial use of vehicles. In fact, the majority of insurance companies will terminate a policy if the car owner fails to disclose commercial vehicle use, such as driving for a ride-sharing company. However, drivers who have acquired a commercial auto insurance policy don’t need to request the rideshare component, as it is already included in their coverage.

The second reason why Uber and Lyft drivers need rideshare insurance is because the commercial insurance offered by these companies has some significant gaps. For example, they only offer minimal coverage while waiting for a ride, and no coverage at all while not actively looking for passengers. Coverage from these commercial insurance policies is only in effect while the ride is in progress. Having rideshare insurance is the best way drivers can protect themselves financially if an accident takes place.

Rideshare insurance plays a larger role when drivers work for smaller or newer ride-sharing companies. In some cases, these companies may not offer drivers enough coverage to deal with accidents, making rideshare insurance as the main barrier against liability.

How does the commercial insurance from Uber and Lyft work?

Uber and Lyft have a commercial auto insurance policy that protects drivers against liability from car accidents. However, it has coverage limits and only applies under certain circumstances. In general, the coverage level from commercial insurance policies offered by ride-sharing companies will depend on which driving period a driver is in. Uber, for example, separates the ride-sharing process into four distinct periods, which are used to determine coverage level:

  • Period 0, also known as offline phase, happens when an Uber driver is not actively seeking new fares and appears as offline in the mobile app. During Period 0, drivers are not covered by the ride-sharing company’s commercial insurance policy. If an accident takes place, drivers will only be covered by personal auto insurance.
  • Period 1, or waiting for request. This period includes all drivers whose app is on and who are waiting for a ride. During Period 1, personal auto insurance is only active if the rideshare component has been purchased. Insurance from Uber and Lyft only provides a limited amount of liability coverage of $50,000 per individual, $100,000 per incident and $25,000 for property damage. Commercial insurance only covers the driver’s liability against third parties for injuries or property damage. However, if an accident occurs during Period 1, drivers must first file a claim with their insurance company unless stated otherwise by state laws or their rideshare policy.
  • Period 2, or ride accepted. This period starts when a driver accepts a ride request and ends when they pick up the passengers. During this period, commercial insurance from ride-sharing companies is available in its entirety, replacing personal and rideshare insurance. If an accident takes place, Uber and Lyft will cover up to $1 million in liability per incident. This coverage includes injuries, property and vehicle damage.
  • Period 3, or ride in progress. This final period begins after the passengers have been picked up and lasts until they reach their destination. Uber and Lyft insurance remains active just as in Period 2. If drivers have comprehensive and collision coverage, commercial insurance will also cover the vehicle up to its value if necessary. Rideshare insurance is needed the most during the first two periods, which is where drivers are more financially vulnerable. After passengers have been picked up, ride-sharing companies take care of most expenses if an accident takes place. This also includes up to $1 million in medical expenses and property damage per incident, even if an uninsured or underinsured driver is involved.

How to buy rideshare insurance

The largest insurance carriers such as Allstate, Geico, Farmers, MetLife and Progressive have recently been expanding their rideshare policy offers to meet driver demand. However, not all insurance carriers offer rideshare policies in every state. As a result, the first thing an Uber or Lyft driver should do is contact their personal auto insurance company and find out whether rideshare coverage is available in their state.

If the answer is no, it may be necessary to switch carriers as rideshare insurance is not sold as a standalone package. If the answer is yes, the next step is to analyze their rideshare coverage and see if it can fill the gap left by Uber and Lyft insurance. If it does, the final step would be to purchase the additional coverage and continue picking up passengers as usual. If not, drivers have two options: they can move to a carrier with better rideshare insurance or switch to a commercial auto insurance policy.

Rideshare insurance is cheaper than a commercial auto insurance policy. However, switching to a commercial policy maybe be easier than spending time and money looking for other options in the state. Commercial auto insurance offers comprehensive coverage against all forms of liability and is not limited to ride-sharing, so drivers can switch to other activities without losing coverage.

Eric Tomasso