Insurance options for rideshare drivers

2023-05-19 08:58:00 • 82 Views

Rideshare services are more popular than taxis in many parts of the country. At least 2 million rideshare drivers transport passengers in the U.S. Those drivers will need to make sure they get the right insurance, whether your work part-time or full-time.

Your personal auto policy won’t cover you for business purposes. Uber and Lyft offer insurance for their drivers, but it’s often not enough.

To bridge those insurance gaps, drivers can get standalone rideshare policies or coverage through an endorsement added to your personal auto insurance. However, if you don’t understand the differences in these policies, you could unknowingly have coverage gaps that increase your financial liability.

Here’s what you need to know about insurance options for rideshare drivers.

Ridesharing insurance options

Ridesharing services only have been around for a decade. The insurance industry has had to evolve with the business model of these companies.

Fewer than 20 insurers currently offer any form of rideshare coverage. Many times that coverage isn’t comprehensive or only covers drivers during a portion of their trip. This type of rideshare coverage basically fills coverage gaps in the insurance policies Uber and Lyft offer.

To completely understand how rideshare coverage varies by insurer, you need to understand the different coverage periods that make up a ride. Typically, an Uber or Lyft divides a trip into three distinct coverage periods:

Rideshare timeline and coverages

Rideshare timeline	Personal auto insurance	Personal rideshare endorsement	Rideshare company (TNC) insurance
Offline: App is off, personal driving	Yes Personal auto insurance in effect	Yes Some insurers have a rideshare endorsement for this period. Otherwise, coverage will continue under personal policy portion.	No
Period 1: Driver is online and available for hire	No	Yes This is the riskiest period for drivers, so personal rideshare policies can help fill the gap.	Yes Contingent liability coverage of 50/100/25
Period 2: Driver accepts bid, en route to pick-up location	No	Yes Rideshare company insurance is primary, but some personal insurers have endorsements for this period.	Yes $1 million liability, $1 million uninsured/underinsured motorist bodily injury, contingent collision and comprehensive up to actual cash value (Deductibles from $1,000 – $2,500)
Period 3: Passenger in vehicle	No	Yes Rideshare company insurance is primary, but some personal insurers have endorsements for this period.	Yes $1 million liability, $1 million uninsured/underinsured motorist bodily injury, contingent collision and comprehensive up to actual cash value (Deductibles from $1,000 – $2,500)
Return to Period 1: Passenger exits	No	Yes Reverts to Period 1 coverage	Yes Contingent liability coverage of 50/100/25

What does rideshare insurance cover?

Uber and Lyft offer rideshare drivers liability coverage and contingent collision and comprehensive coverage as long as a passenger has been assigned.

However, Uber and Lyft‘s insurance policies feature high deductibles and low coverage limits. That combination can leave drivers on the hook financially if they get into an accident.

Uber’s insurance deductible is $1,000. Lyft’s is $2,500. So, you’ll have to pay this amount out-of-pocket before Uber or Lyft’s insurance kicks in to cover any costs.

Uber’s coverage and Lyft’s policies both include:

$100,000 of bodily injury coverage per accident.
$25,000 of property damage coverage per accident.
$1 million of coverage if you were to get into a covered accident while the app is on.

However, this level of liability coverage is far below the level that experts recommend:

$100,000 of bodily injury coverage per person
$300,000 of bodily injury coverage per accident
$100,000 of property damage

All of this leads to coverage gaps that increase your financial risk. That’s especially true during Period 1. Period 1 is when you’re waiting to accept passengers and are covered only under the rideshare companies’ liability policies.

This is why you need rideshare coverage.

“Rideshare insurance kicks in the minute the driver is on the app and available for passengers. The next level of coverage is when the driver is actually engaged, which can be en route or having a passenger in the car. If an individual is not on the app, their personal auto insurance will be primary,” says Micheal McCready, a personal injury attorney and managing partner at McCready Law, which has represented rideshare drivers in cases involving insurance coverage denial.

McCready says simply becoming a rideshare driver doesn’t transform your car into a vehicle for business use. He says, “if you want to be fully covered, you need to disclose to your personal auto insurance that you drive for a rideshare and they must issue a separate rider or endorsement.”

Several insurers offer this option and various levels of coverage. Geico, for example, covers all three periods. Its rideshare insurance has a $250 deductible and the policy cost just a bit more than a personal auto policy. Allstate offers a “Ride for Hire” endorsement in certain states, but this policy add-on will add up to $20 a year to your premium.

With all these differences, it’s important to shop around, compare policies and thoroughly read the fine print before you sign up for rideshare insurance.

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Companies offering rideshare insurance

Some companies provide rideshare policies that cover all three periods of an Uber and Lyft trip, while some only offer coverage during Period 1.

Some rideshare policies are only available for certain rideshare services.

Since auto insurance is regulated at the state level, the availability of rideshare insurance differs by state. Certain insurers may not offer this coverage in your state. For example, Allstate provides rideshare coverage in Alaska, but many other insurers don’t.

Here’s an overview of the current coverage options available if you want to become a rideshare driver:

QuickTake

Rideshare insurance – All your questions answered

Ridesharing insurance coverage by state and insurance company

As of March 2020

Insurance company	States available	Periods covered	Cost (above personal policy)
Allstate	AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WI, WV, WY	All*	Adds extra $15 to $20 to annual personal auto policy premium
American Family		Period 1	Adds about $15 a month to policy costs.
Erie	IL, IN, KY, MD, OH, PA, TN, VA, WV, WI & D.C.	All	Available with quote
Esurance	CA, IL, NJ	All 1	Available with quote
Farmers Insurance	AL, AR, AZ, CA, CO, DC, DE, GA, FL, HI, IA, ID, IL, IN, KS, MD, MI, MN, MO, MT, ND, NE, NJ, NM, NV, OH, OK, OR, PA, SD, TN, TX, UT, VA, WI, WV	Period 1	Estimated 8 percent increase in rates in California, estimated $15 per month in other states.
Geico	AL, AR, AZ, CA, CO, CT, DC, DE, FL, ID, IL, IN, IA, KS, LA, ME, MD, MA, MN, MS, MO, MT, NE, NH, NM, ND, OH, OK, OR, PA, RI, SC, SD, TN, VT, VA, WA, WI, WV, WY	All	Less than traditional commercial policy (estimated to be $25 extra per month)
Liberty Mutual	CT, MA, ME, NH, RI, VT	All	Available with quote
Mercury	AZ, CA, FL, GA, IL, OK, NV, OK and TX	Period 1	As little as $.90 a day
Metlife	CA, CO, IL, TX & WA	Period 1,2	Premiums will vary based on mileage driven for ridesharing (estimated to raise rates by 10%)
Progressive	AL, AZ, CO, GA, ID, IL, IN, IA, KY, ME, MA, MI, MN, MS, NE, NM, ND, OH, OK, PA, RI, TN, TX, VA, WV	All	Available with quote
Safeco	AZ, CO, IL, IN, KS, MN, MO, OK, OR, UT, WA & WI	Period 1	Estimated to be less than $10 a month
State Farm	AL, AZ, AR, CA, CO, CT, DE, GA, FL, ID, IN, IA, KS, KY, LA, ME, MD, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, ND, OH, OK, OR, PA, SC, TN, TX, UT, VT, VA, WA, DC, WV, WI, WY	All**	15% to 20% above regular policy according to website
Travelers	CO & IL	Period 1	Available with quote
USAA	AL, AZ, CA, CO, GA, IA, IL, IN, KS, KY, MA, NJ, MD, ND, NE, NV, OH, OK, OR, TN, TX, WA, WY	Period 1	An extra $6 to $8 per month, or approximately $40 to $50 per six-month policy term.

* Period 1 – all coverages, Period 2 & 3 – Allstate provides deductible help in certain situations

** Period 1 – full coverage available, Periods 2 & 3 – Mercury & State Farm provide coverage in excess of ridesharing company coverage

How does rideshare insurance compare to taxi insurance?

Aside from rideshare insurance, many insurers offer commercial auto policies. Taxi insurance is one example.

Rideshare policies are less expensive than commercial policies for taxis. Taxi policies offer more comprehensive coverage that covers vehicle damage to yours and other vehicles and injuries to you, a passenger or another driver.

Insurance requirements for taxis vary by state. However, the liability coverage requirements are significantly higher for taxi drivers than they are for personal or rideshare drivers.

In New York, taxi drivers must have $100,000 of bodily injury coverage per person and $300,000 of bodily injury coverage per accident. In Illinois, taxi drivers must have a minimum of $250,000 for any one person, $250,000 for any one accident and $50,000 of property damage coverage.

Different insurers, including Geico and Progressive, offer separate rideshare and commercial insurance policies. Since the commercial policies are more expensive, this often leaves taxi drivers at a disadvantage compared to rideshare drivers.

However, Progressive states on its website that taxis require commercial insurance because they pick up passengers at unscheduled times at various pick-up locations, which “creates a different type of insurance risk.”

Progressive’s taxi insurance doesn’t just cover taxi cabs; it also covers sightseeing tours, airport shuttle services and other types of transportation businesses, which all come with varying levels of risk that would be covered best under a commercial policy.

You likely won’t need a commercial policy as a rideshare driver. However, it’s important to make sure you’re covered. It’s also vital that you get rideshare coverage from a credible company with a good reputation.

McCready says he’s represented several clients who have had their claims denied even when their rideshare app wasn’t turned on and they got into an accident while their personal policy was supposed to be in effect.

“Substandard insurance carriers are extending denial of coverage for all uses, even personal use, simply because someone signs up for ridesharing driving.”

To reduce your risk of encountering this situation, here are two tips:

Take the time to compare insurance companies. You may even want to start with your own personal auto insurance provider. You already have a track record with the company and you’re probably satisfied with their customer service.
Ask if you can add an endorsement to your policy, whether they offer a separate standalone policy. If they don’t, getting rideshare coverage through another insurer may affect your personal auto policy.

Once you have all this information, you can make an informed decision and operate a rideshare business that makes you money, instead of costing you money in the form of unforeseen coverage gaps.

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