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Rideshare driver? Here's why your regular insurance isn't enough

If you're a rideshare driver, CheapInsurance.com explains why regular car insurance may not provide adequate coverage and how rideshare insurance protects your income and car.

John Davey
Posted 7/10/24

If you're a rideshare driver, CheapInsurance.com explains why regular car insurance may not provide adequate coverage and how rideshare insurance protects your income and car.

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Rideshare driver? Here's why your regular insurance isn't enough

If you're a rideshare driver, CheapInsurance.com explains why regular car insurance may not provide adequate coverage and how rideshare insurance protects your income and car.

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A person is on the phone while a Rideshare driver approaches for pickup.

Tero Vesalainen // Shutterstock

The freedom and flexibility of rideshare driving are attractive. You set your own hours, be your own boss, and earn extra cash. But before you hit the road with passengers, consider a crucial detail: your car insurance. Many rideshare drivers are surprised to learn that their regular auto insurance policy might not provide full coverage when you're logged into a rideshare app. This can leave you financially exposed in case of an accident.

CheapInsurance.com takes a look at rideshare insurance, answering questions and ensuring you're properly covered on every ride. We'll explore the limitations of your personal car insurance policy, the rideshare companies' own insurance offerings, and the benefits of dedicated rideshare insurance. By the end, you'll know exactly what coverage you need to protect yourself and your car.

Key Takeaways

  • Regular car insurance often excludes rideshare driving.
  • Rideshare companies offer limited coverage during specific stages of a ride.
  • Separate rideshare insurance bridges the gap for full protection.
  • Coverage varies by state - check your local Department of Motor Vehicles or insurance company.
  • Rideshare insurance is affordable and potentially tax-deductible (consult a tax professional).

Does Your Regular Car Insurance Cover Your Ridesharing Side Gig?

You might think your standard car insurance policy will handle everything, just like it does for your daily commute or errands. Unfortunately, that's often not the case when you're using your car for commercial purposes, like ridesharing.

Most car insurance policies exclude coverage when your vehicle is being used for ridesharing. This means if you're in an accident while logged into the app, even if you haven't accepted a ride yet, your insurance might not pay for repairs or damages. This gap in coverage can leave you facing a hefty financial burden.

Do Rideshare Companies Offer Rideshare Car Insurance Coverage for Their Drivers?

While your auto insurance might leave a gap, rideshare companies like Uber and Lyft do offer some insurance coverage for their drivers. However, it's important to understand the limitations:

  • Limited Coverage: Both Uber and Lyft provide basic liability insurance during specific periods when you're logged into the app. This covers injuries or property damage to third parties (passengers or other vehicles) in case of an accident where you're found at fault. However, these policies typically have lower coverage limits compared to a personal policy. For example, Uber and Lyft might offer $50,000 per person and $100,000 per accident for bodily injury, which might not be enough in a severe accident.
  • Coverage Stages: The extent of coverage offered by Uber and Lyft depends on whether you have a passenger in your car. There are typically three stages:
    • App On, No Passenger: During this time, coverage is minimal and might only include basic liability insurance.
    • En Route to Pick Up Passenger: Once you've accepted a ride request and are heading to pick up the passenger, insurance coverage increases to include higher liability limits and potentially uninsured/underinsured motorist coverage.
    • Passenger in Car: This offers the most full coverage car insurance for accidents that occur while you have a paying passenger on board.

It's crucial to note that these are just general examples, and specific coverage details can vary depending on your location and the rideshare company you drive for. Always refer to the official insurance policy information provided by Uber or Lyft for the most up-to-date details.

What is Rideshare Insurance? Is it Always "On"?

Here's where things get a bit more nuanced. There are two main types of rideshare insurance to consider:

1. Ridesharing Company Coverage

Limited to Specific Periods: This basic insurance provided by Uber, Lyft, or similar companies only kicks in during specific times when you're logged into the app. As mentioned earlier, there are typically three stages with varying coverage levels depending on whether you have a passenger or not.

Not Active During Non-Rideshare Times: This coverage is definitively not "on" all the time. If you're in an accident while the app is off or you haven't accepted a ride request, the ridesharing company's insurance won't provide any protection. You'll need to rely solely on your personal car insurance (assuming it doesn't exclude rideshare use).

2. Separate Rideshare Insurance Policies

Designed to Fill the Gap. This is additional insurance purchased specifically for rideshare drivers. It acts as a bridge, providing coverage during those periods when your automobile insurance and the ridesharing company's coverage fall short.

May Offer Some Non-Rideshare Coverage. While primarily focused on rideshare activities, some separate rideshare insurance policies might offer limited coverage even when the app is off. This could include basic liability coverage for accidents during your personal errands or commutes. However, this is not always the case, so it's crucial to carefully review the policy details before purchase.

Read the Fine Print. Always thoroughly read the terms and conditions of both your personal auto insurance policy and any additional rideshare insurance you consider. This will ensure you understand exactly what is (and isn't) covered during rideshare and non-rideshare times.

Which Insurance Companies Offer Rideshare Insurance for Drivers?

Since your regular car insurance might have gaps and the rideshare company's coverage has limitations, having dedicated rideshare insurance is a smart move for rideshare drivers. But where do you find this additional coverage?

The good news is that several major car insurance companies now offer rideshare insurance as an add-on to your existing policy. Here are some popular options:

National Providers 

These companies offer rideshare coverage in many states.

  • Progressive
  • Allstate
  • State Farm
  • Geico
  • Mercury Insurance

Regional Providers 

Certain car insurance companies might only offer rideshare insurance in specific states. Be sure to check with local providers in your area.

Finding the Right Provider

Compare Quotes. Get car insurance quotes from multiple companies to compare rates and coverage details.

Consider Coverage Options. Rideshare insurance policies can vary. Look for one that provides coverage during all three rideshare stages (app on, en route, and with passenger), and consider additional options like collision and comprehensive coverage for your vehicle. If you are financing your car, or you have a newer car, full coverage car insurance would be the better option.

Check for Compatibility. Make sure the rideshare auto insurance you choose is compatible with the rideshare companies you drive for (e.g., Uber, Lyft).

By taking the time to research and compare affordable car insurance quotes, you can find a rideshare insurance policy that fits your needs and budget, ensuring you're properly protected on the road.

Do Insurance Companies Offer Rideshare Insurance in Every State?

While rideshare driving is popular nationwide, the availability of rideshare insurance can vary by state. Here's a basic breakdown.

Most States. The good news is that a majority of U.S. states allow major insurance companies to offer rideshare insurance as an add-on to your personal car insurance policy. Major national companies typically operate in these regions.

State Specific Requirements

Some states have specific regulations regarding rideshare insurance. Here are a few examples.

  • California. California requires rideshare companies to provide minimum liability coverage of $1 million per accident when a driver has a passenger or is actively engaged in a ride request. However, drivers are still encouraged to obtain additional rideshare insurance for extra protection.
  • New York. Similar to California, New York mandates a minimum $1 million liability coverage from rideshare companies when a driver has a passenger. However, New York also requires rideshare companies to provide some coverage during the period when the app is on but a ride hasn't been accepted.
  • Illinois. In Illinois, rideshare companies are not required to offer any insurance coverage. This means rideshare drivers in Illinois heavily rely on obtaining separate rideshare insurance policies for comprehensive protection.

It's important to note, these are just a few examples, and laws regarding rideshare insurance can be subject to change.

Always Check Your State: The best way to determine rideshare insurance availability and any specific state requirements is to contact your local DMV or your preferred car insurance company. They can provide the most up-to-date information on rideshare insurance regulations in your area.

When Does Rideshare Insurance Cover a Driver and the Vehicle?

Understanding when your rideshare insurance is "on" is crucial. Let's consider some specific examples of coverage scenarios:

Rideshare Insurance Coverage

Passenger in Car. This provides the most comprehensive coverage. If you're in an accident while a paying passenger is on board, your rideshare insurance (purchased separately) typically covers:

  • Liability. This pays for injuries or property damage caused to others (passengers or other vehicles) if you're found at fault in the accident.
  • Collision and Comprehensive. Depending on your policy, you might also have coverage for repairs to your own vehicle in case of a collision (accident with another vehicle) or comprehensive damage (theft, vandalism, etc.).

En Route to Pick Up Passenger. Once you've accepted a ride request and are heading to pick up the passenger, rideshare insurance usually offers:

  • Increased Liability Limits. Compared to when the app is on with no passenger, coverage limits for injuries or property damage to others typically increase.
  • Uninsured/Underinsured Motorist Coverage. This can be helpful if you're in an accident caused by a driver with inadequate insurance. (Not all rideshare policies offer this, so check your specific plan.)

Rideshare Insurance Does NOT Cover

App On, No Passenger. During this period, coverage is minimal. Your rideshare insurance might only provide basic liability coverage, and often with lower limits compared to having a passenger.

Non-Ridesharing Activities. Unless your policy specifically mentions it, rideshare insurance generally doesn't cover accidents that occur when the rideshare app is off or you're not actively engaged in a ride (e.g., running personal errands). In these situations, you'll rely on your personal car insurance (assuming it doesn't exclude rideshare use).

Examples

  • Scenario 1 (Covered): You're driving with a passenger toward their destination when another car runs a red light and collides with your car. Your rideshare insurance would likely cover repairs to your car (if you have collision coverage) and any injuries to the passenger and yourself, as well as the other driver (up to your policy limits).
  • Scenario 2 (Not Covered): You're logged into the app waiting for a ride request when you rear-end another car at a stoplight. Since you don't have a passenger, your rideshare insurance might offer minimal coverage, potentially leaving you responsible for repairs to your car and damages to the other vehicle.

Remember, these are just general examples. Always refer to your specific rideshare insurance policy wording for the most accurate details on coverage during different scenarios.

How Much Does Rideshare Insurance Cost?

The cost of rideshare insurance can vary depending on several factors.

Your Location. States with stricter rideshare regulations might have slightly higher insurance costs.

Your Driving Record. A clean driving record with no accidents or violations typically translates to lower insurance premiums.

Your Coverage Level. Policies with higher liability limits and additional coverage options like collision and comprehensive will naturally cost more than basic plans.

The Rideshare Company You Drive For: Some insurance companies might offer discounts for rideshare drivers who work with specific platforms (e.g., Uber or Lyft).

Estimated Costs

Generally Affordable. The good news is that rideshare insurance is typically an affordable add-on to your existing car insurance policy. Prices can range from around $5 to $25 per month on average, depending on the factors mentioned above.

Finding the Best Price

Shop Around. Get auto insurance quotes from multiple insurance companies to compare rates and coverage options.

Consider Discounts. Ask about any available discounts for rideshare drivers or bundling your rideshare insurance with your existing car insurance policy.

By comparing quotes and understanding your coverage needs, you can find a rideshare insurance plan that fits your budget and provides the peace of mind you deserve on the road. Remember, a few extra dollars a month can make a significant difference in case of an accident.

Worth Noting: Can Rideshare Car Insurance Be a Business Deduction on Income Taxes?

In most cases, rideshare car insurance premiums can be deducted as a business expense on your tax return. However, the specific rules and regulations can vary depending on your tax situation. It's important to consult with a tax professional to determine the best way to handle rideshare-related tax deductions, including car insurance costs.

This story was produced by CheapInsurance.com and reviewed and distributed by Stacker Media.