What Uber and Lyft drivers need to know about the car

Uber and Lyft are the most popular car hire services, they are similar to taxis or other traditional car services. The major differences car hire services like Uber and Lyft among others and the traditional car services is that, unlike taxis, a passenger looking for a ride on the street, all they have to do is download the Uber and Lyft app onto their smartphone and arrange for a ride with a driver through the app.

The pricing structure for an Uber or Lyft ride differs, some rides are cheaper than a regular taxi, with some rides could be expensive than a standard taxi. Uber rides could be expensive because of traffic stops or long distances. Uber rides pricing is well known to vary with demand. Lyft, on the other hand, is well known for its prospective passengers not paying for their rides; they receive donations instead of their passengers.

Nonetheless, drivers get involved in car accidents every day, even rides are drivers. And when it comes to auto insurance for car hire services, the most important thing you should take note of as a rideshare driver is that both you and your vehicle is not covered by personal insurance policies if you use your vehicle for any kind of commercial purpose, and driving for Uber or Lyft is an example of a commercial purpose. 

It is advisable for any kind of commercial purpose. Even though it is a requirement for eligibility to have personal insurance for your vehicle to drive for Uber and Lyft. The personal auto insurance policy does not take care of any claims that may come up while you are driving for Uber and Lyft. Since Uber and Lyft makes provision for an insurance policy that covers you, it does not cover everything. To be fully covered as a rideshare driver, it will be nice to try additional coverage options, just to be safe.

During the period when the car hire service app is on and is waiting for a prospective passenger to request a ride is on his way to the pickup, or is driving a passenger to a destination. Between the driver and the company, whose insurance covers what and to what extent? Is there a different response to the case when there is an injury or property damage? Does the state affect the outcome in any way? And who does an injured Uber or Lyft passenger’s claim affect? Read to know more.

When Uber and Lyft services stepped into the limelight, they faced serious problems concerning their drivers’ insurance coverage, mainly because most of the drivers didn’t have any insurance policies that cover commercial purposes. What the rideshare drivers had were garden-variety personal policies, which don’t include coverage when the vehicle is being used for commercial purposes. It makes sense because the company first assesses the risks following an accident or a claim before it sets the premium ( extends coverage) and know that, the higher the risk of a claim, the higher the premium.

The risk following the claim is considered low when the vehicle in question is used for personal use. Nothing other than the number of hours and miles on the road go up when a vehicle is used for commercial purposes. So in cases when someone needs to drive to work, they would need a commercial policy with premiums much higher than those for personal policies. Uber and Lyft drivers settle for a policy with lower premiums so that their drivers can afford them, but if they had bought a commercial policy, their drivers would be covered nicely.

How Uber and Lyft Insurance, and Rideshare driver co-exist.

Uber and Lyft services realized that the endorsement added to the insurance policy was not enough to protect their drivers, so they came up with one of their own, and here is how it works.

A rideshare driver’s time is divided into three phases. When a driver’s Uber or Lyft app is closed, he is not in “driver mode.” Insurance coverage varies depending on the phase in which the accident occurred, as explained below.

Phase 0: When the app is closed. The driver’s own personal car insurance policy takes full responsibility when he’s not in “driver mode.” (When the driver is not logged into the Uber or Lyft app). During this time, Uber or Lyft’s insurance coverage takes no responsibility for their drivers’ actions.

Phase 1: When the driver opens the app and is driving around waiting to be requested by a passenger. This is considered third party insurance because it only takes care of the losses sustained by others involved, injured, or had their properties damaged as a result. Uber and Lyft liability coverage kick in for any accident that is the drivers’ fault. It does not take care of the Uber or Lyft driver’s injuries, car, or property damage. 

  • The liability coverage pays $50,000 per person for injury sustained by passenger or third party, $25,000 per person for property damage, or third-party vehicle damage, the most Uber is willing to pay for coverage is $100,000, all of which the rideshare driver is excluded.

Phase 3: The passenger is in the car, and the period ends when the passenger gets out of the vehicle.

If after reading the above, you believe all your problems are gone, you might want to know that  the coverage will only step up once you have claimed on your policy first, which means that Uber and Lyft benefits will only kick in after you’ve been able to prove that you have your insurance which also means that;

  • Uber insurance will step in only if your insurance company denies the claim, Usually because you failed to purchase a ridesharing endorsement.
  • And if you did purchase an endorsement, your policy covers you leaving any excess you can’t meet to Uber and Lyft’s insurance.

Here’s the crazy part, drivers who didn’t purchase the ridesharing endorsement will violate their policy since they’ve been driving commercially and made claims on a personal policy. And the insurance company will most probably cancel the insurance.

But to be safe and save yourself the hassle, you might want to try other additional coverage options like a Rideshare Car Insurance, which is sure to leave with a smile.


  • Editorial Director of the The Fintech Times

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