When Uber and Lyft became the standard ridesharing options, drivers weren’t thinking about car insurance policies. In the early days, most rideshare drivers didn’t think they needed extra coverage. Drivers were considered independent contractors and were responsible for maintaining their own vehicle and paying for their own insurance policy.
Although independent contractors are personally responsible for supplying their own equipment to get the job done, car insurance operates outside of that rule when the car is driven for money.
Car insurance companies require disclosure when a car is driven to make money. In that situation, the driver is required to carry either rideshare or commercial car insurance. This means all rideshare drivers are required to carry rideshare or commercial car insurance. Don’t be one of the 28% of drivers who keep their insurance company in the dark. You might need to file a claim one day.
The penalties for being underinsured
Being an underinsured rideshare driver has mild to severe consequences. If you don’t have rideshare or commercial coverage and your insurance provider finds out you’re driving for money, they might cancel your policy. In this case, you can move to another company, but if you’re involved in an accident, the consequences of being underinsured are steep.
There are serious financial consequences for being underinsured if you’re involved in an accident and found at fault. For instance, law firms like FFP Law routinely recover millions of dollars for wrongful death lawsuits. If you’re driving for a rideshare company and you cause an accident that results in someone else’s death, being underinsured will ruin your life. In addition to financial penalties, you could also face criminal charges.
Additionally, some states have laws that don’t require rideshare companies – or your insurance company – to pay for damages and injuries if you don’t have rideshare insurance and you’re at fault.
Uber and Lyft provide varying levels of coverage
Although it’s not perfect, both Uber and Lyft have taken steps to provide coverage to their drivers. Nerd Wallet explains how it all works and includes a chart detailing the policies and coverage amounts for both Uber and Lyft.
In summary, when your rideshare app is off, your personal car insurance policy covers you. When your rideshare app is on and you’re waiting for a ride request, your personal policy won’t cover you unless you specifically have a rideshare insurance policy. However, while your rideshare app is on and you’re waiting for a ride request, both Uber and Lyft provide basic liability coverage.
After you accept a ride request and you’re on the way to pick up a passenger, your rideshare company’s full policy goes into effect. The same is true when you have passengers in the car.
You can draw on comprehensive and collision coverage from your Lyft or Uber policy only if you already carry comprehensive and collision coverage on your personal policy. However, this only applies after you’ve accepted a ride request or while you’re transporting passengers.
Uber and Lyft will provide coverage if you cause an accident while waiting for a ride request, but you’ll have to file a claim with your insurance company first. If your claim is denied or you’re not fully reimbursed, then your ridesharing employer’s policy will cover you, but coverage will be low.
Ridesharing insurance vs commercial insurance
Ridesharing coverage is available as an add-on from many popular insurance companies including Allstate, Mercury, USAA, and State Farm. Some companies charge under $10-$15 per month while others charge 15%-20% of the existing premium.
Ridesharing coverage is designed to fill the gaps between your regular personal policy and the coverage provided by your ridesharing employer. If your insurance company doesn’t provide rideshare coverage, you’ll need to ask about a commercial policy to cover the gaps.
Recently, Farmers Insurance announced they will provide commercial insurance to Uber drivers in a total of fourteen states and the District of Columbia. Liberty Mutual has been providing coverage for Uber drivers since December 31, 2019 in Puerto Rico, South Carolina, Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire, and Maine.
Liability coverage laws differ state-to-state
While most of these rules apply across the board, some states have laws that differ. For example, in California and Maine, rideshare drivers must have a commercial or rideshare-specific policy while waiting for a ride request. Otherwise, Uber must cover you.
Ridesharing is still in a growth phase
Although insurance company James River dropped Uber due to unprofitability, other insurance companies seem to have no problem cashing in. While ridesharing evolves, drivers will need to have patience and maintain all required coverage while states work out individual laws.