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A Closer Look at Accident Protection for Rideshare Drivers

Woman rideshare driver in her car with cell phone attached to the dashboard.

Driving for rideshare apps such as Uber and Lyft can be a relatively simple way to generate supplemental income – but you must do it safely. We are not just referring to your driver rating, either. No matter how safe you are on the road, accidents can (and do!) happen.

Rideshare apps provide some car insurance for their driver partners, but there are several notable loopholes. If you are driving for a rideshare app, you will want to familiarize yourself with all of the ins and outs to avoid any nasty surprises. That side hustle could be a lot less profitable if you get stuck with the bill to repair your vehicle after a car accident.

Make sure your broker would give you a 5-star safety rating on your Car Insurance, with this in-depth look at the insurance protection provided by Uber and Lyft.

The Three Phases of Liability on a Rideshare Trip

Your ridesharing app has the most at stake when there are passengers in the car. The more people who could potentially be injured, the greater their liability. Because of this, both major ridesharing companies base their liability for accidents on the phases depicted below:

Color phone and car graphics on a green background that show how rideshare provided insurance changes depending on is the app is off, on , ride matched, passengers in vehicle and completed trip.

Image references https://help.lyft.com/hc/en-us/articles/115013080548-Insurance-Policy

Stage 0: Your app is turned off.

When the app is turned off, you cannot accept ride requests. This stage accounts for driving your car for personal use, where the rideshare company would not be involved at all in your travel whereabouts. Driving in this stage could include going back and forth to work or school, going to the grocery store, and making the trip to a friend’s house.

  • Coverage: Determined by your Personal Auto Insurance Most states require you to carry some type of personal coverage to even license a vehicle. Driving without any Car Insurance is extremely dangerous for you and others, if not illegal.
  • Cost: The price of your personal auto policy will be based on your deductible, which is the amount you pay out-of-pocket when you file a claim. The higher the deductible on your policy, the less expensive the payments will be. However, if you cannot afford to pay $1K out-of-pocket if your car is damaged in an accident, it may be worth paying more to carry a policy with a $250 or $500 deductible.

Stage 1: The app is turned on, and you are waiting for a ride request.

At this point, you may be parked or driving to a busier area, in order to match with someone who is looking for a ride. Because you are engaging with Uber or Lyft, they have some liability for any accident that occurs during this stage. However, because you have not matched with a rider and are not yet on “business travel,” their liability is much lower than in Stages 2 and 3.

  • Coverage: During this stage, both Uber and Lyft provide only liability coverage to pay expenses to a third party if you cause an accident. This would pay for up to $50K per person in the 3rd party vehicle, with a $100K maximum limit per accident. For property damage, such as crashing into a median, there is a $25K maximum limit per accident.It is important to note that Lyft’s policy is specifically named as contingent liability coverage, meaning it will only kick in after you have filed a claim (and been denied) through your Personal Auto Insurance policy. In order to do this, you must be carrying liability coverage that is at least identical to Lyft’s on your personal policy, if not at a higher level.
  • Cost: There is no deductible to be paid out-of-pocket in Stage 1. However, it is important to note that both policies are only offering 3rd party liability – which means you are still on the hook for body shop’s bill to get your own vehicle back in shape. You would also be liable for expenses greater than $100K per accident, or greater than $25K in property damage.

Stages 2 and 3: The app is turned on, and you have accepted a ride request.

Stage 2 begins when you have been matched with a passenger and provided with their location. You are driving to this location to pick up the passenger(s), but they have not yet entered the vehicle. Once your passenger(s) have been picked up, the trip is in progress and you enter Stage 3.

  • Coverage: Both apps broadcast their robust “million-dollar” coverage, but you will want to read the fine print on this. Uber and Lyft offer up to a $1M maximum limit for the below coverages:
    • Third-Party Liability – For damages to another vehicle, passenger(s) in the 3rd party vehicle, and/or damage to another person’s property. This coverage is identical to the coverage provided in Stage 1, but with a much higher limit per accident – if you will recall, Stage 1 is capped at $100K.
    • Uninsured Motorist (UM) or Underinsured Motorist (UIM) Bodily Injury Coverage – For bodily harm to you and any passenger(s) in your vehicle, resulting from an accident caused by a 3rd party who is either uninsured or does not have sufficient insurance to pay necessary expenses. Uber specifically includes coverage for hit-and-run accidents with an unidentified at-fault driver. Lyft’s policy does not specifically mention hit-and-run coverage.
    • Contingent Comprehensive & Collision – For physical damages to your vehicle resulting from an accident (collision) or other single-car incident, such as fire or theft (comprehensive). Both coverages will apply regardless of whether you or another driver are at fault. Because they are contingent coverages, you must carry this protection on your own Personal Auto Insurance policy in an amount that is at least identical to Uber or Lyft’s in order to use their coverage.Uber’s stated coverage limit for these contingent coverages is the actual cash value of your vehicle. Lyft’s is stated as the actual cash value of your vehicle or the cost of repair – “whichever is less.”
  • Cost: There is no deductible for a UM/UIM or third-party liability claim on either app. Uber’s deductible for a contingent comprehensive and/or collision claim is $1K. Lyft’s deductible is up to $2,500. If you do not have this amount available to pay out-of-pocket at once, you could find yourself stuck without a vehicle until you can.

Important Coverage Considerations for Uber and Lyft Drivers

Drivers who partner with a rideshare app rely on several different coverages through several stages of driving. The below infographic compares coverage for the two most popular platforms, Uber and Lyft (as we’ve described in full in the section above.) You can also read these specifics on the Uber Insurance and Lyft Insurance Policy websites.

Side by side comparison of Uber and Lyft coverage details, including stage 1, stages 2 and 3, and deductible.

Image references https://www.nerdwallet.com/blog/insurance/best-ridesharing-insurance/

For drivers on either platform, it is important to know that once you have filed an insurance claim, you will be removed as a driver from the app until the claim has been resolved. If the accident was your fault (and would thus impact your safe driving record) you may be removed from the app altogether. This limits your ability to earn any additional income from the app for a period of time that can be quite lengthy.

Note: Some states require insurers to carry a minimum level of coverage that differs from the stated amounts in Uber or Lyft’s standard coverage. In those states, the policy may be modified to comply with local requirements.

Driving for Uber or Lyft? Webb Insurance Can Help Protect You

As a rideshare driver, carrying the right insurance could be the difference between a successful side-gig and emptying out your checking account. The team of brokers at Webb Insurance is here to help you succeed. Webb Insurance is proud to offer a ridesharing endorsement through our insurance partners at Safeco, Progressive and Auto Owners. See the full list of companies we represent.

Contact us today for a coverage check-up if you are driving for Uber or Lyft. You can also schedule an appointment with an Insurance Broker to discuss adding a ridesharing endorsement to your Personal Auto Insurance policy through Webb Insurance.