Auto Insurance Basics

Uber and Lyft: Car Insurance for Ridesharing

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Driving for ridesharing companies such as Uber and Lyft have become increasingly popular forms of primary and secondary incomes. The companies and their drivers have grown so fast, however, that laws and regulations are struggling to keep pace -- not to mention the insurance companies who have only recently begun to accommodate rideshare drivers. Below we'll go into detail about what extent insurance from rideshare companies such as Uber and Lyft cover you, the gap between rideshare insurance and your personal coverage, and which insurance companies offer you coverage for being an Uber or Lyft driver. 

Does My Regular Personal Auto Insurance Policy Cover Ridesharing?

You may be wondering, why can't you just use your regular car insurance policy to cover your rideshare dealings? The main issue with your regular insurance policy is that companies feel a rideshare service no longer fits the purpose of what you originally insured your car for.

Essentially, companies have two forms of auto insurance, commercial and personal. Personal auto insurance is meant to cover you when you're commuting (driving your car to your physical office), running errands, or for leisure activities. Commercial is an umbrella term for all business uses, which is important because when you turn on the Uber or Lyft app, your car is no longer a personal car -- it becomes a business car. Farmers Auto Insurance, for example, explicitly states: “Your personal auto insurance policy wasn’t designed to provide you with coverage when you are working as a rideshare driver with companies like Uber.” 

Do Uber and Lyft Provide Insurance? 

The answer is yes and sort of. It all depends on which period of the ride you are in when picking up a customer. There are three periods when it comes to ridesharing. 

StageFunctionInsurance
Off Duty App is "Off", regular driving Regular Auto Policy
Period 1 Turn app "On", but no passenger matched Gap
Period 2 App is on, passenger is matched and need to drive to pick them up Uber or Lyft Insurance Policy
Period 3 App is on, and passenger is now in your car and driving to their destination Uber or Lyft Insurance Policy

When you are off duty, whatever insurance you have will cover you if you get into an accident. During Periods 2 and 3, Uber and Lyft will fully cover you across all types of insurance: liability, collision, comprehensive and underinsured motorist, if you get into an accident. You enter gray waters, however, with Period 1, which we call the "Gap". 

uberlyft

Uber and Lyft offer a "contingent insurance" for that "Gap" period (not to be confused with Gap Insurance). Unfortunately, it is not an encompassing coverage. For one, the coverage is only for liability insurance. This means it will only pay out for any medical expenses incurred by someone else injured in an accident, or any damage you cause to other people's property. Any personal medical expenses or damage to your car will not be covered under Uber or Lyft’s contingent policy.

It may get worse though. There has been a trend for insurance companies to not just deny claims for accidents that occur during rideshare work, but to also completely drop the driver from their policy. While the chances of getting into a costly accident in the time between flipping on the app and matching a passenger is hopefully low, you can potentially be exposed a lot. The costs to repair your car, and/or any personal medical costs could reach well into the thousands, and eat into your earnings. As well, losing the entirety of your insurance can essentially end your job as a rideshare driver. 

What Insurance Do You Need During the Gap?

The ideal thing a driver can do is to sign up for commercial auto insurance, which would cover him or her across all stages of driving. A commercial auto policy, however, may be too expensive for just a part-time driver and would not make sense financially to have. 

Luckily, insurance companies have recognized how tempting it is for drivers to take the risk of using their personal policy, and thus have been gradually adding various types of rideshare coverages to personal policies that are more cost effective than a full commercial policy. GEICO for example gives a "hybrid" insurance which is a combination of a personal policy and a commericial policy. Most other companies however will simply provide you more coverage during period 1, or what we call "gap coverage". 

The question largely comes down to where you live, and what insurers are offering to sell in your state. That's because some car insurance companies have yet to establish a ridesharing business in some states.

Which Companies Offer Rideshare Insurance and at What Cost?

Basically all the major insurance companies have some sort of policy regarding rideshare insurance. Unfortunately, the policies are not found in every state, with major states such as New York, New Jersey, Florida, and Michigan having no policies at all. Below you can see the ridesharing insurance products carriers offer, in what states they operate, and an estimate of their coverages and costs across the country. 

Insurance CompanyStates Where Policy Exists Estimated CostRideshare Company CoveredName
Allstate  CO, IL, TX, VA $15-$20/year All Gap Coverage 
Erie  DC, IL, IN, KY, MD, OH, PA, TN, VA, WV, WI $138.75/month* All Full "Business" Coverage
Farmers  AK, AZ, CA,CO, IL, KS, MN, NE, NV, NM, OH, OK, TN, TX, UT, WI N/A All Gap Coverage
GEICO CT, DC, GA, IL, LA, MD, NE, NM, OH, OK, OR, PA, SC, TX, VA, WV $259.75/month** All Full "Hybrid" Coverage
MetLife CA, CO, IL, TX, WA Varies w/ miles driven during Lyft service Lyft Endorsement covers all stages of trip
Mercury AZ, AR, CA, NE, NV, NM, OK Min. 20 cents/day  All Gap Coverage
Metro Mile  CA, IL, WA $40/month + 5 cents per mile*** Uber Gap Coverage
Progressive  PA N/A Lyft Full Commercial Coverage
State Farm  CO N/A All Gap Coverage
USAA CO, TX, AZ, MA, OH $40-$50/year All Gap Coverage

*Estimate taken from Illinois, used profile of 30 year old single male w/2015 Toyota Corolla 
*Average Estimate taken from Connecticut and Georgia
***Miles accumulated between "App on" and "Picked Up Passenger" 

Most of the policies address the "Gap", meaning for an extra cost to your normal policy, you will get Periods 1 and 2 fully covered. Erie, GEICO and Progressive take it further and simply provide a full coverage that serves as the drivers main insurance as well, although at a heftier cost. Some prices are "N/A" because you need to call an agent and add the coverage to your existing policy.

Unfortunately, unless you are from California, Colorado, Illinois, or Texas, you may not have many options to decide what coverage is most cost effective. The cheapest rideshare insurance we've found, such as Allstate's and USAA's are only available in a handful of states. GEICO, one of the most wide-ranging rideshare coverage providers, offers what they call a "hybrid insurance", essentially a cross between personal and commercial auto insurance. The coverage will cover you for all your driving needs, personal and rideshare, but at a higher cost.

A regular personal GEICO policy, for a 30 year old male, would only cost $108.49 per month. Uber claims its average driver makes $90,000 per year (a heavily disputed figure), while several sources put earnings in a range of $10,000 and up, depending on where you drive and how much you drive. If you plan to only recreationally drive Uber, and say you make $12,000 in a year in Connecticut, the GEICO hybrid policy will essentially cost you a quarter of your profits -- not even including gas and maintenance costs. Erie is a bit more cost effective, with a "business" policy only costing about $300 more a year, an amount drivers can hypothetically make in a week. Below we compare side by side quotes taken from an address in Chicago.

CompanyRegular Auto PolicyRideshare Policy
GEICO $1,140 $3,743
Erie $1,472 $1,778

If Erie is available in your state, it may be the best coverage of them all due to its totallity and relative cheapness, based on the sample scenario we looked at. 

What If My State Does Not Have Rideshare Car Insurance?

If you are in a state with no coverage from any company such as Michigan (notoriously known for its expensive auto insurance premiums), we would recommend taking it one step at a time to best assess your options. First weigh the cost of a commercial auto policy against how much they think they can make as a driver. One Michigan quote we pulled from Allstate for a car being used for "business" ended up costing $1,094/month. Essentially, unless you are working full time for Uber, you won't come out ahead with a $13,128 per year policy.

The next best thing would be to call your insurance company and ask what they would do in the event of an accident. Some companies, in certain locations, may be more favorable toward taking claims from rideshare drivers. If both of these options are unfavorable, it may be best to wait until your state has coverage. Each major insurance company continues to add states to their policies and it should not be much longer until your state is also included. Taking the risk can be very costly, even with the contingent coverage.

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