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5 Things Rideshare and Delivery Drivers Need to Know about Insurance

pizzas in delivery boxes on the floor with kids sitting around the boxes.

Most of us are guilty of creating online accounts and breezing through the required “Terms & Conditions.” Maybe you stop to read the sections in ALL CAPS, or maybe you do not read the legal disclaimers at all. No matter the technique, it goes without saying that the consequences can be unexpected. For rideshare drivers on apps like Uber and Lyft, this is particularly true.

Ridesharing apps have been a total game-changer in the transportation industry – but for many, the greatest appeal is the ability to generate a “side hustle” as a driver on one (or both) platforms. Unfortunately, these drivers may be unaware of the potentially significant financial consequences of driving for a service without the proper auto insurance, until they are involved in a car accident.

If you or a loved one are considering driving for a ridesharing service, make sure you are aware of the top 5 ways it could impact your auto insurance coverage before you start accepting passengers.

1. Personal Auto Insurance policies are for personal (i.e., non-income-generating) use.

Insuring your family vehicle with Personal Auto Insurance provides you the peace of mind that you are covered for any unexpected accidents. Whether you are traveling for lunch dates, play dates, soccer practice, or taking a cross-country road trip, this policy will be in full-force while you are using your vehicle within your everyday life.

Once you start earning money for services that involve driving, the game changes dramatically. Now your vehicle is being operated for commercial use. You will probably be driving even more, so you will be exposed to a greater likelihood of getting into a car accident. For this reason, you will need a higher level of coverage, such as a Commercial Auto Insurance

The drawback? An individual Commercial Auto Insurance policy could cost upwards of $2K for one coverage period. If you were considering driving for a rideshare service to generate additional income, this expense could greatly outweigh your profits.

  • Side Note: Some personal auto policies come with an endorsement for “business use” of the vehicle, but it is VERY important to have your insurance broker clarify how this is defined. Generally, this is limited to driving back and forth from work and/or work meetings – driving for a rideshare company would still be excluded.

2. Your Personal Auto policy could be canceled if you violate the Coverage Terms.

You now know that your Personal Car Insurance policy does not provide coverage for commercial use of your vehicle. So, if you make the all-too-common mistake of driving for Uber or Lyft without letting your insurance company know about it, you may inadvertently be violating your policy’s Coverage Terms. As a result, your coverage could be dropped when your insurer finds out – whether that’s at renewal, or after you have been in a fender-bender.

Make an appointment with your Insurance Broker before you ever start driving for a delivery or ridesharing service. They may be able to help you find different coverage, such as Commercial Auto Insurance or a Ridesharing Endorsement to a Personal Auto policy, that could help you accomplish your goals. You will learn it is much easier to change coverage than it is to find coverage after a previous company has dropped you.

  • Side Note: It is a crime to knowingly file a claim on a Personal Auto policy that excludes coverage for commercial use, and try to hide the fact that an accident occurred while you were driving for a ridesharing app (or other business.) Tell the truth, always!

3. The insurance provided by a rideshare app does not cover everything.

This point is so important, we wrote an entire blog post about it. While apps like Uber and Lyft do provide insurance for their driver-partners, there are a LOT of loopholes that could leave you on the hook for thousands of dollars, because:

  • Uber and Lyft only provide minimum liability coverage for third-party damages when the app is turned on, and you have not matched with a rider. Their more robust coverage does not kick in until a ride has been accepted. And remember, third-party damage means that your car is not covered.
  • Uber and Lyft provide contingent coverage for your vehicle after a ride has been accepted. Contingent coverage means that you must already be carrying this coverage on your Personal Car Insurance policy, in order to use theirs as a “backup coverage.”
  • The contingent coverages Uber and Lyft provide for your vehicle (comprehensive and collision coverage) are typically not required by state law. So, if you are only carrying the minimum liability insurance mandated by your state, you will not be able to access these coverages at all.

Read more about what is not covered by Uber’s and Lyft’s insurance policies.

4. Rideshare insurance deductibles are not cheap.

In a best-case scenario where you are involved in an accident while driving for a rideshare app, you are able to take advantage of the collision or comprehensive coverage to repair your car. There’s just one remaining catch: You will have to cough up as much as $2,500 to use the coverage in the first place. That could be a deal-breaker.

Uber and Lyft brag about having robust, $1M policies – but they do not come cheap. Uber’s collision/comprehensive deductible is $1,000, and Lyft’s is “up to” $2,500. This deductible is the amount you have to pay out-of-pocket before their coverage kicks in. If you do not have that money on-hand, you could be out of luck. Plus, for a repair of $3-4K, you would be paying more than half of the bill on your own.

  • Side Note: Some income-generating driver apps, such as Grubhub, DoorDash and Postmates, offer driver-partner insurance that may be even less than what is currently offered by Uber and Lyft. For example, DoorDash offers $1M in third-party liability, but does not provide coverage for any damages to a driver’s vehicle.

5. A rideshare or delivery accident could crush your wallet in other big ways.

The worst and most unpredictable thing about accidents is that they can happen to anyone, no matter how safely you are driving. You never know who else is on the road and what choices they have made. If you find yourself victim of a hit-and-run, where the at-fault driver leaves without being identified, only Uber specifically names coverage for this type of incident. Lyft currently does not.

There could be additional financial implications if your vehicle is not paid off, and is being financed by a bank or other institution. Uber and Lyft provide their contingent collision/comprehensive coverage for the cash value of a vehicle – whereas the amount you have financed may be more, once you add interest. If this creates a gap, you will be responsible for paying the balance to your lender. What’s more, Lyft will only cover vehicle repairs, if that expense is less than the vehicle’s cash value.

Last but not least, an accident on your driving record could limit your ability to do any future trips for a rideshare or delivery service. Then, it’s back to the books!  

Get Comprehensive Accident Coverage with Webb Insurance

Technology is the way of the 21st century – and Webb Insurance has solutions to help you take advantage of all the latest features without compromising your safety. For St. Charles drivers who have their Personal Auto Insurance with our company, we offer a Rideshare Endorsement to protect you while driving for Uber or Lyft. We also have a full portfolio of Commercial Insurance products for professional driving services, including Commercial Auto Insurance.

Driving for hire? Contact Webb Insurance today, or request a free quote on the Car Insurance protection you need.