Rideshare Insurance: Here Is What You Need To Know

The on-demand economy has been thriving over the past few years, showing no signs of slowing down. Companies like Uber and Lyft have benefited greatly from this recent surge and have gone on to dominate the industry competition, especially in the ride-sharing services market.

More drivers are required to fill the increasing demand as more consumers turn to these ride-sharing services. This often poses the question of where drivers stand should an accident happen while they are out on the job. No matter how diligent a driver you are, there is always the potential for a road accident or your vehicle getting damaged, but who foots the bill when this happens?

While both Uber and Lyft provide their insurance for drivers, it does not cover them for the entirety of their working tasks. As you might expect, there are plenty of gray areas with insurance policies when it comes to ride-sharing, and it can get a little confusing if you’re looking to start driving for one of these companies.

In this article, we will break down and highlight these gray areas and will tell you all you need to know about rideshare coverage. Let’s get into it.

What is rideshare coverage?

Rideshare coverage is a type of car insurance specifically designed for people driving for ride-sharing companies, such as the aforementioned Lyft and Uber. This type of coverage is intended to protect drivers from the considerable financial losses that can occur when they are involved in some sort of accident that their personal and commercial coverage (provided by the company) does not cover. Think of it as a hybrid policy that bridges the gap between these two types of insurance. 

Surprisingly, it’s not obligatory to have the type of insurance if you want to drive for Uber or Lyft, but it would be wise to pick it up if you are one of their drivers. The commercial cover that these companies offer to their drivers does not provide end-end coverage, meaning that you won’t be covered from the moment you enter your car to the moment you leave it.

Secondly, your personal auto cover will almost certainly not cover you for any drives that were intended for commercial usages, such as working for Uber and Lyft.

What happens if you don’t have Rideshare insurance?

If you don’t have rideshare insurance, you could potentially end up in a situation where you incur heavy financial losses due to an accident, even if you’re not at fault. Let’s take a look at how rideshare insurance incidents are classified in different situations. 

First of all, ride-sharing is split up into four periods. It’s vital to understand each of these periods as they play a huge role in determining what you are covered for and what you aren’t. Let’s take a look at them below:

Period 0: This is when the app is closed, and you aren’t using the care for commercial purposes. At this stage, your regular auto policy will cover you.

Period 1: This is the problem area, or the gray area if you will. This period covers the time that the driver is waiting for a ride request. As you are technically working, your personal auto insurance will not cover you, and the Lyft and Uber insurance have very minimal coverage. This is the period of maximal exposure that rideshare insurance covers.

Laws vary from state to state, but if you have an accident during this waiting phase, your personal insurance typically cancels your coverage, and you may be liable for all costs.

Period 2: This is the time period when the driver accepts the fare, and you’re en route to pick up the customer. Uber and Lyft’s commercial policy will be in full effect here.

Period 3: This is the phase when you have customers in your car, and you’re delivering them to their destination. As soon as they get out and the fare has ended, you will be back to Period 1 or 0, depending on your intentions. Uber and Lyft insurance cover up to $1m in damage for these periods.

How much does it cost to add Rideshare insurance?

Commercial car insurance will cover you for everything you need, but it’s usually expensive and is a little too comprehensive for what you will need as an Uber or Lyft driver. Instead, it’s better to go for the lighter rideshare insurance offers, which don’t break the bank.

The great news is that you can usually add this to your normal policy with something called a ‘rideshare endorsement.’ The price you have to pay depends on a multitude of factors, including your age, previous accident history, age of the car, and your state. 

On average, adding on a rideshare endorsement will cost around $10 – $20 extra per month, or an additional 15% to your premium.

What Does Rideshare Insurance Cover?

Rideshare insurance is made to cover the gray areas between the commercial coverage offered by the rideshare companies and your personal auto policy. This ensures that you’re covered for all eventualities, but especially any accidents that occur during period one.

The specific incidents you are insured against, and the level of financial coverage you qualify for depends upon the insurance company you choose and the type of endorsement you take out. Be sure to check in with your personal auto insurance provider to find out what they can offer you.