Last Updated: July 2019
Uber and Lyft have been a pair of rapidly growing rideshare companies for nearly a decade. It’s common for individuals to get the motivation to enroll in the program to make extra money driving individuals to various destinations. It does, however, often leave individuals wondering how car insurance works for uber drivers as well as lyft drivers.
When Uber and Lyft initially launched, auto-insurance was one of the most significant problems the company faced. 10 years later, Uber and Lyft seem to have figured out the issues.
Well, sort of…
However, most new uber and Lyft drivers are still 100% unaware of how car insurance works in these situations.
So, how does car insurance work for Uber and Lyft drivers? Car insurance for Uber and Lyft drivers works using 3 phases in which car insurance coverage is increased through each phase. The phases include when the mobile app is closed, when the driver is in transit to a pickup and when the driver has a passenger in the vehicle.
Here’s a better look at the phases of car insurance coverage for Uber and Lyft drivers:
Phase 1- The Uber or Lyft Mobile App is Closed: Individuals Personal Car Insurance Coverage is in effect.
Phase 2- The Uber or Lyft Driver is In Transit to A Pickup: Liability Coverage is Active and Provided by Uber and Lyft
Phase 3- The Uber or Lyft Driver Has a Passenger Inside the Vehicle: 1 Million in Liability Coverage Active with Uber and Lyft
Don’t get too ahead of yourself.
This was simply a 30-second snapshot of how car insurance works for Uber and Lyft drivers.
We do have some other information about liability coverage and auto-insurance policies that’s worth sticking around for and is imperative for Uber and Lyft drivers to understand.
If, of course, you don’t want to deal with any unpleasant surprises if something did happen to you while operating as an Uber or Lyft driver.
If you have 2-3 more minutes to cover this topic, here is what you can expect to learn about how car insurance works for Uber and Lyft Drivers (click to skip to that section):
Driving for Uber or Lyft can undoubtedly bring in some extra cash to help pay for pesky debts or extra vacation money.
There is no doubt about that.
Millions of Americans are turning to Uber and Lyft to run away from their old, mentally demanding jobs.
However, doing so without the proper research and being uninformed about the specifics such as how car insurance works and will cover you driving for Uber and Lyft can be a dangerous game to play.
Our goal in this post is to avoid these dangers altogether.
Here is what you need to know.
The 3 Phases of How Car Insurance Works for Uber & Lyft Drivers
We covered this briefly in our 30-second snapshot above, but it’s so significant to understand that we are going to touch on this one more time.
Car insurance coverage for Uber and Lyft drivers works in 3 phases.
During each of these 3 phases, the coverage that’s in force changes from your personal car insurance policy to the hands of Uber and Lyft to protect you or the others involved in the accident.
Here’s another detailed look at these 3 phases of auto-insurance coverage with Uber and Lyft:
Phase 1- During phase 1, your mobile app is completely turned off. This could be while you’re taking a restroom break or even on your way to favorite “Uber or Lyft Hot Spot.”
This could also mean that you are not driving for uber or lyft at this time.
Many individuals who drive for Uber or Lyft use their personal vehicles and just because you are driving in your car, does not mean you are always looking for the next “ride” or surge to take place.
During this phase, pretend like Uber and Lyft doesn’t even exist.
You are just an average person living your life.
During phase 1, you are covered under your personal car insurance policy only.
If anything happens while the mobile is off and inactive, Uber or Lyft will not pay you a penny, and they will not pay the third party involved in the accident a penny either.
This is the only phase where this is the situation.
During the other phases, Uber and Lyft must step up and take at least some responsibility for the damages.
Phase 2- During phase 2, you now have your Uber or Lyft mobile app turned on and your driving around listening to your favorite music, praying someone request a ride soon.
During this phase, Uber and Lyft have now stepped up and provided a small level of liability car insurance coverage for you.
It’s not much, and the news gets worse.
In phase 2, your liability insurance provided by Uber or Lyft is only in the sum of the following amounts:
50,000 per person injured in an accident caused by the Uber Driver or Lyft Driver
100,000 Total Injury Liability Per Accident (This is Uber’s and Lyft’s Maximum Coverage Provided)
25,000 Property Damage Liability for any property damage caused by the Uber driver (Uber and Lyft Maximum)
It gets worse, my friends.
If an accident occurs while driving for Uber or Lyft, your car insurance coverage that Uber or Lyft is footing the bill for, never actually covers you.
If you are hurt or your own car is totaled, Uber and Lyft does not pay you 1 penny or even mail you a “get well soon card.”
Car insurance provided through Uber or Lyft while the mobile app is on specifically and exclusively only covers the 3rd party individuals involved in accidents or property damage situations caused by the Uber driver or Lyft driver.
Outside of this small nugget of help that Uber and Lyft are providing, you are entirely out of luck.
If you are feeling a little unprotected at this point, don’t forget we still have phase 3 to cover.
Phase 3- In phase 3 while transporting passengers for Uber or Lyft, your total liability coverage is now 1 Million.
Again, this is zero coverage for you as the driver.
This is simply 1,000,000 in liability coverage that protects your passenger in case of injury or other damages that may occur.
It seems like you probably have a good idea of what is taking place.
Uber and Lyft will pay a small fee to protect everyone involved in an accident while operating an Uber or Lyft but does not have any desire to protect you no matter what the situation may be.
Not to mention, these liability coverages are extremely low.
Remember how we said in phase 2 that 100,000 is the maximum liability that Uber and Lyft will provide?
Well, this maximum does not change even if you hit a school bus and cause injuries to a group of 55 individuals.
Clearly, in these situations, you are underinsured, and you have a significant problem on your hands, and perhaps even the 3rd party individuals who have been injured have a problem to deal with as well.
Nonetheless, this is how car insurance works for Uber and Lyft drivers, and it doesn’t seem likely to change anytime soon.
In fact, these car insurance coverages, liability maximums, and insurance Uber and Lyft are willing to provide are new legal limits established after several lawsuits.
The point here is simple.
Uber and Lyft have already been dragged through the dirt, made their changes, and feels great about the car insurance coverage they are providing their Uber and Lyft drivers and likely won’t increase coverage anytime soon.
That’s why the next several sections of this post are equally as important to read.
These sections can help shed some light on additional precautions and actions you can take to ensure you are protected and have the best possible car insurance in place.
How Car Insurance Companies Handle Accidents for Uber & Lyft Drivers
If you are operating as an Uber or Lyft driver and have an accident, your car insurance coverage works in a somewhat typical fashion.
The injured parties in the accident would make a claim against the driver’s personal liability car insurance policy.
This is essentially asking the Uber or Lyft drivers car insurance company to cover them (the injured party).
In this situation, you, as the Uber or Lyft driver, would make a claim against your collision car insurance coverage.
Here is when things get messy.
Problems That Occur with Car Insurance Driving for Uber & Lyft
Let’s keep spinning off the idea we were covering above.
An accident occurs, and the third-party claims against your liability and you claim against your collision coverage.
This is when it’s time for an auto-insurance adjuster to enter the picture.
The insurance adjuster is going to know relatively quickly that you had an accident while providing ride-sharing services or “driving for hire.”
This is considering a commercial use in the eyes of the car insurance companies which could present you with some big problems.
Commercial use or “driving for hire” is not covered under these policies and will deny the claim if you attempt to file under your own car insurance policy.
Not only that, but technically, your car insurance company will likely cancel your car insurance coverage for violating the agreement not to use your vehicle for ridesharing services.
This is a messy situation and quite frankly, a recipe for disaster for everyone involved in the situation.
Now that no coverage is being utilized, the only next logical step that could prevent this nightmare is for the 3rd party to straight-up sue the Uber or Lyft driver for damages.
The driver is now being held personally liable and the 3rd party is being dragged through a lengthy court battle to collect any damages that occurred specifically because the Uber or Lyft driver didn’t understand how car insurance works.
The good news is that solutions are available, and most of the best options are what we plan to discuss next in this post.
Car Insurance Ridesharing Endorsements for Uber and Lyft Drivers
Ahh, a breath of fresh air.
A headline in this post that seems like a solution instead of only highlighting life-altering problems that can occur from inadequate auto insurance coverage while Uber or Lyft driving.
In enters ridesharing endorsements.
Like we have covered heavily already in this post, your personal car insurance provider is unlikely to cover any damages, injuries or other issues that occur while operating an Uber or Lyft.
Plain and simple.
Ridesharing endorsements can eliminate this problem for you.
Yes, it does cost an extra few dollars per month.
We are talking in the ballpark 5-20.00 dollars per month additional in premiums depending on the car insurance company you choose to work with.
I think this is a small price to pay for the disaster it can help avoid, but I suppose that’s ultimately your call.
It’s also straightforward to add rideshare coverage to your car insurance coverage.
Here’s a look at the steps you should take to handle this effectively:
Step 1- Tell Your Auto Insurance Provider That You Intend on Driving for Uber or Lyft
Step 2- Speak to An Agent About Possible Gaps in Your Coverage That Need Attention
Step 3- Ensure That All These Gaps Are Filled and You’re Fully Protected
This is perhaps one of the steps in purchasing auto-insurance that we don’t recommend streamlining or completing entirely online.
Even car insurance companies that do streamlined and digital offers for applying for coverage will likely have licensed car insurance agents standing by ready to speak with you.
If you are looking for a more personal conversation, be sure to shop around and find the best car insurance near you to protect you while ridesharing.
Car Insurance Exclusions for Uber & Lyft Drivers
We have touched on this topic briefly, and hopefully, it’s straightforward to understand thus far into this article.
If you don’t specifically have ridesharing endorsements on your car insurance policy, you are not covered if something happens and your insurance provider will likely cancel your policy.
Additionally, Uber and Lyft only is providing the minimums for liability coverage while operating as a driver.
Not to mention, Uber and Lyft auto-insurance only kicks into gear after you filed the claim and been denied by your own car insurance provider.
Long story short, add the endorsement or be willing to take the massive risk if disaster does decide to strike.
Are Commercial Drivers Licenses Required for Uber & Lyft Drivers?
No, commercial driver’s licenses are not required for Uber or Lyft Drivers.
This is a common question because you are technically driving in a “work” type capacity and “driving for Hire.”
However, a simple ridesharing endorsement is all you need to be fully protected while operating a vehicle under the capacity as an Uber or Lyft driver.
Disclaimer: We are not State Insurance Commission nor the Department of Motor Vehicles so specific questions such as these, you may want to check your only local and state laws to verify.
Better safe than sorry in these situations.
Finding the Best Car Insurance Companies for Uber & Lyft Drivers
Now comes the best part of this post.
How do you find the best car insurance companies for Uber and Lyft drivers or other ridesharing drivers?
Shop around is the best advice we can give you.
Plenty of excellent car insurance companies offer ridesharing endorsements.
Allstate Insurance Company likely has the broadest coverage area and currently offers rideshare car insurance coverage in 46 U.S. States.
You can use our rate tool on this page to begin comparing rates and simply inquire with the company what the best options and availability for rideshare car insurance coverage may be.
Final Thoughts: Get the Correct Car Insurance as An Uber or Lyft Driver
We apologize if this post may have alarmed you a bit about how car insurance works as an Uber driver or Lyft driver.
We know that you likely had no idea how much risk was involved and how easy it may be to overlook the correct car insurance when driving for Uber or Lyft.
Nonetheless, we certainly feel better than we have educated you on this topic and allowed you to protect yourself before and disaster does occur.
Always shop around to find the best car insurance rates, best car insurance company and ultimately, the best car insurance rideshare coverage you can find.
Don’t settle for less than the best.