What Do Uber and Lyft Drivers Need to Know About Car Insurance?

You're required to carry liability insurance as a rideshare driver, but will Uber or Lyft's own insurance also protect you?

By , Attorney | Updated by Dan Ray, Attorney
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  • How does automobile insurance work when you drive for Uber or Lyft? Does your personal auto insurance policy offer any protection? Must you buy additional coverage from an insurance company? Do Uber and Lyft offer insurance protection? The time to get answers to these and other questions is before you start driving for a rideshare service.

    In a nutshell, your personal auto policy offers no protection, to you or your passengers, if you're in a traffic accident while you're working for a rideshare service. Both Uber and Lyft do provide their drivers with insurance coverage. But the coverage they provide is likely to be limited in amount, and it will only apply after you've made a claim against your own auto insurance. To make sure you've got the insurance protection you and your passengers need, you'll have to buy a separate "rideshare endorsement," at an additional premium, from an insurance company.

    The rules can be complex and confusing. To sort things out, let's find out why rideshare insurance can be a problem. From there, we'll turn to the specifics of rideshare insurance coverage.

    The Problem With Rideshare Insurance

    We start with a bit of background on auto insurance policies and coverages, and how insurance companies calculate premiums. That background helps us to zero in on the problem with rideshare insurance.

    Types of Auto Insurance

    Auto insurance policies come in two basic varieties:

    • Personal auto policies cover vehicles used for personal purposes—things like driving the kids to soccer practice, taking the family out to dinner, or even commuting to and from your job.
    • Business (sometimes also called "commercial") auto policies cover vehicles used for business purposes—a delivery van, a cargo truck, or a company auto used by the business's salespeople are examples.

    The kind of auto insurance you need will depend, then, on how you use your vehicle. As we'll see, if you're driving for Uber or Lyft, your personal auto policy won't protect you.

    Auto Insurance Coverages

    Your auto insurance company offers a wide range of insurance coverages. If you drive for a rideshare company, at a minimum you should make sure you have enough of these types of coverage:

    • liability coverage
    • comprehensive and collision coverage
    • uninsured and underinsured motorist coverage
    • personal injury protection coverage (if you live in a so-called "no-fault" state), and
    • medical payments coverage.

    Let's take a closer look at each.

    Liability Coverage

    Liability coverage takes care of bodily injury and property damage suffered by others if you're an at-fault driver in a car accident. For instance, let's say you run a red light and hit another car, causing personal injuries to the other driver and damaging their car. Liability coverage will pay for the other driver's bodily injury and property damages, up to the limit of your coverage and subject to your deductible. Liability coverage is a type of "third-party" insurance, meaning that it will cover the bodily injury and property damage claims of others, but it will not cover your own losses.

    Collision and Comprehensive Coverage

    Collision coverage will repair or replace your car if it is damaged in an accident, regardless of who is at fault. Comprehensive coverage will cover your loss if your car is damaged by something other than an accident, like a fire, a hail storm, or vandalism. Coverage, once again, is subject to your policy limit and your deductible. Normally, these coverages will pay for the actual cost to repair your car or, if your car is a total loss, the actual cash value of your car.

    Uninsured and Underinsured Motorist Coverage

    As the names suggest, uninsured motorist (UM) and underinsured motorist (UIM) coverages protect you if you're in an accident with an at-fault uninsured or underinsured driver. UM and UIM coverages will take care of you and all passengers in your car, covering your bodily injury claims up to the limits of your coverage. Most people carry UM and UIM coverages in amounts equal to their limits for liability coverage, described above.

    Personal Injury Protection Coverage

    If you live in a "no-fault" state, your state law probably requires you to carry personal injury protection (PIP) coverage. In insurance lingo, PIP coverage is "first-party" insurance, meaning you—the insured policyholder—can bring a claim for PIP benefits. This coverage takes care of certain economic losses like medical bills up to your coverage limit, regardless of who was at fault in an accident. PIP coverage is also offered in some non-no-fault states.

    Medical Payments Coverage

    Here too, the name kind of says it all. Medical payments (med pay) coverage pays for the medical bills of anyone in your car who's hurt in an accident. Like PIP coverage, med pay is first-party insurance. Payment doesn't depend on who was at fault; if you're an at-fault driver, your medical payments coverage will pay your medical bills, up to your coverage limit. If you have separate health insurance, you might want med pay coverage to take care of your deductible. If you don't have a separate health policy, med pay is a relatively cheap form of health insurance coverage for car accident injuries.

    How Insurance Companies Calculate Premiums

    When you buy car insurance and the company issues you an auto policy, the company sets your premiums based on the risk you represent—including the likelihood that you'll be involved in a covered accident that will generate a claim (by you or someone else). The higher the risk, the higher your premium. The risk of a claim is much lower when your car is used for personal driving, as opposed to being used for business purposes.

    This makes sense if you think about it. When you use your auto for business purposes, the number of miles you drive goes way up. More miles means a greater risk that you'll be in an accident. Increased accidents translate to increased claims costs for the insurance company, which the company passes on to you in the form of higher premiums.

    To make a long story short, business auto policies cost more than personal auto policies.

    What's the Problem With Rideshare Insurance?

    Rideshare companies and their drivers face a problem when it comes to auto insurance. First, personal auto policies specifically exclude coverage when you're driving for a business purpose, and insurance companies consider driving for Uber or Lyft to be business use.

    Second, most rideshare drivers don't have business auto policies. Instead, they have garden-variety personal auto policies. Rideshare drivers don't want to be saddled with high-cost business auto premiums. At the same time, most aren't willing to risk financial disaster by driving for Uber or Lyft without adequate insurance coverage.

    Solving the Problem With Rideshare Insurance

    Uber and Lyft solved the insurance problem by working together with insurance companies to offer a two-tiered insurance coverage scheme. Rideshare companies provide some insurance protection for drivers who are working, but drivers must also buy a special kind of insurance called a "rideshare endorsement" to make sure they have the coverage they need. We'll get into the coverage details below. First, though, a word about your personal auto insurance.

    Does My Personal Auto Policy Provide Any Protection?

    In a word: No. If all you have is a personal auto policy with no rideshare endorsement, that policy provides you with no protection when you're driving for Uber or Lyft. If you cause a wreck while you're "on the app," (meaning you've got the app open and you're logged in) then—depending on when the accident happens—you may find yourself underinsured or, worse yet, completely uninsured for some kinds of losses.

    But there's even more bad news. If you failed to disclose to your auto insurer that you also use your car to drive for a rideshare company, the insurance company is likely to cancel or refuse to renew your personal auto policy. When your personal auto policy was issued, you promised the insurance company that your car would only be used for personal, not business, purposes. The insurance company set your policy premium based on this promise. Driving for Uber or Lyft violates the terms of your policy. In legal terms, you're in "breach" of your insurance contract, which gives the insurance company the right to cancel (or refuse to renew) your policy.

    Here's what you need to know: If you drive for Uber or Lyft, you must tell your insurance company. If your insurer offers rideshare endorsement coverage (the major insurance companies do) then you can buy the coverage you need. If your insurance company doesn't offer rideshare endorsement coverage, you'll have to look elsewhere for protection.

    How Rideshare Auto Insurance Works

    As mentioned above, the rideshare insurance solution is a two-tiered scheme that involves both insurance companies and rideshare companies. Here's how it works.

    How Rideshare and Insurance Companies Classify Drivers

    In the world of ridesharing and insurance, a driver's time is divided into three phases, or periods. Note that rideshare companies only consider a driver to be working if the driver is on the app. A driver who isn't on the app is not in "driver mode." If you're not in driver mode, then the only available insurance is your personal auto policy.

    If you're on the app, the types and amounts of available insurance coverage depend on when the accident happens. We describe the available coverages in more detail in "Insurance Offered by Uber and Lyft," below.

    Period 1. You're driving around, waiting for a match with a rider. If you cause an accident now, Uber or Lyft will provide you with limited amounts of liability coverage. But first, you'll have to present the claim to your own auto insurance company. If you have a rideshare endorsement, it will also provide coverage.

    Period 2. You've been matched with a rider and are on the way to the pick-up. If you cause an accident now, Uber or Lyft will provide you with liability coverage, and might also provide collision, comprehensive, and other coverages. But first, you'll have to present the claim to your own auto insurance company. If you have a rideshare endorsement, it will also protect you.

    Period 3. The rider is in your car. Period 3 ends when the rider gets out. If you cause an accident now, Uber or Lyft will provide you with liability coverage, and might also provide collision, comprehensive, and other coverages. But first, you'll have to present the claim to your own auto insurance company. If you have a rideshare endorsement, it will also protect you.

    Add a Rideshare Endorsement to Your Policy

    First things first. If you're a rideshare driver, you need to add a rideshare endorsement to your personal auto policy. Uber or Lyft will insure you while you're on the app (see below), but there are gaps in that coverage that you'll want to fill with your own rideshare insurance. Also, Uber and Lyft coverages sometimes have hefty deductibles that a rideshare endorsement can help cover.

    In most cases, your own auto insurance will be what's called the "primary" policy. This means you must look to your insurance before you can collect coverage provided by Uber or Lyft, which is called "contingent" coverage. Stated a bit differently, before you can make a claim against the insurance provided by Uber or Lyft, you'll first have to bring a claim against your own insurance.

    Without a rideshare endorsement, as discussed above, your personal insurance carrier will consider you to be engaged in business activity—and it won't cover you. Worse yet, you'll almost certainly wind up on the receiving end of a cancellation or nonrenewal notice.

    All the major insurance companies offer rideshare endorsement coverage. Most of the companies that do will provide coverages for all three periods when you're on the app, but some only cover Period 1. If your insurance company does not offer a rideshare endorsement, it might object to you buying a rideshare endorsement from another company. In that event, you might need to switch your personal auto policy to the company that sells you the rideshare endorsement.

    Insurance Offered By Uber and Lyft

    Here's how the insurance offered by Uber and Lyft works.

    Period 1: You're on the App and Waiting for a Match

    Uber and Lyft provide liability coverage (as described above) for any accident that is your fault if your own insurance doesn't apply or is insufficient to cover the claims made against you. Keep in mind that this is third-party insurance, meaning it covers only losses sustained by others who were injured or had their property damaged. It does not cover your own injuries or vehicle damage. This liability coverage pays:

    • $50,000 per person for bodily injury to a third party injured in an accident you caused, meaning that's the most that any one injured person can receive
    • $100,000 total for bodily injuries to all third parties injured in an accident you caused, regardless of how many people were hurt or how badly they were hurt, and
    • $25,000 for property damage to a third party's car or other property damaged in an accident you caused, meaning that's the most Uber or Lyft will pay for any vehicle or property damage resulting from the accident.

    Here are some important points to keep in mind about Period 1 coverage. First, as mentioned above, this is "contingent" coverage. Before Uber or Lyft will pay, you'll need to bring a claim against your own policy. Here's how that works:

    • No rideshare endorsement: If you haven't purchased a rideshare endorsement, then when your company denies the claim (which it will, because you're driving for a business purpose), the good news is that Uber's or Lyft's insurance will pay. The bad news is that you've breached your personal auto policy and you'll probably be canceled or nonrenewed. The really bad news is that because the Uber or Lyft coverage limits are so low, third parties who've been injured can sue you for the excess if their damages exceed the coverage limits.
    • Rideshare endorsement: If you have a rideshare endorsement, your policy will provide coverage first, and Uber's or Lyft's coverage will take care of any liability beyond your policy limit. Your own policy must pay up first (it's "primary," in insurance speak). Keep in mind that we're talking about liability coverage for only third-party bodily injury and property damage. Your rideshare endorsement liability coverage won't take care of your own medical bills or lost wages.

    Second, if you want at least some coverage for your own medical bills (if, say, you don't have other health insurance or you want to cover your health insurance deductible), your options are limited. You may be able to buy PIP coverage (if you live in a no-fault state, but check with your insurance agent because PIP coverage is also sold in some non-no-fault states) or med pay coverage through your rideshare endorsement. The same is true for UM and UIM coverages. Coverages and premium costs will vary by state and by insurance company.

    Third, you'll need to look to your own collision coverage to pay for your car's repair or replacement. Here too, you'll only have this coverage if you've purchased it as part of your rideshare endorsement.

    Fourth and finally, because the coverage amounts provided by Uber or Lyft are so small, you'll want to be sure that your rideshare endorsement provides you with adequate protection. Talk to your insurance agent about what coverage limits are right for you.

    Periods 2 and 3: On the Way to Pick Up a Rider or Transporting a Rider

    Uber and Lyft provide liability coverage (as described above) in the amount of $1 million for any accident that's your fault. As with liability claims during Period 1, this is third-party coverage. So, this coverage takes care of personal injuries and property damage suffered by passengers or others who have losses from an accident when you are an at-fault driver. It will not reimburse you, the at-fault driver, for your own damages.

    Here, too, this liability insurance is contingent: It only pays after you've made a claim to your own auto insurance company because your policy is primary. As was the case for Period 1 claims, if you have no rideshare endorsement, you may find yourself in serious financial trouble.

    There is some good news, however. For starters, both Uber and Lyft provide contingent collision and comprehensive coverage for accidents during Periods 2 or 3. For this coverage to be available, you'll need to ensure that your rideshare endorsement includes collision and comprehensive coverages. Make sure you've got enough of both coverages. Remember, collision coverage will pay to repair or replace your car, even if you're at fault for the accident.

    Uber and Lyft collision and comprehensive coverages work like this:

    • No rideshare endorsement: If you do not have a rideshare endorsement, you're in a bad spot. You won't get the benefit of Uber or Lyft coverage until you've first presented your claim to your personal auto insurer. You know how this turns out. By making a claim, you've notified your insurance company that you're in breach of your policy. Expect your policy to be terminated or nonrenewed.
    • Rideshare endorsement: If you have an endorsement, your personal policy will pay first, and then the Uber or Lyft insurance will cover any damages that exceed the limits of your policy. But Uber's and Lyft's coverages are limited to your vehicle's actual cash value and are subject to a hefty $2,500 deductible. Odds are that your rideshare endorsement will take care of the damage to your car, but if the actual cash value of your car is high and your collision coverage limit is low, you might benefit from Uber or Lyft coverage.

    In addition, for accidents that happen during Periods 2 or 3, both Uber and Lyft might provide some PIP and med pay coverage. Recall that these are first-party coverages, meaning they will cover your medical bills up to the coverage limit, even if you were at fault. These coverages are not available in all states, and coverage limits vary according to state law.

    Finally, during Periods 2 and 3, both Uber and Lyft provide UM and UIM coverage that you can look to if you're injured by an at-fault driver who is uninsured or underinsured. Here too, coverage availability and amounts vary according to state law.

    Here's a table that summarizes the insurance coverages available from Uber and Lyft:

    Uber and Lyft Car Insurance Coverage

    Driving Period

    Uber Coverage

    Lyft Coverage

    Period 1: App is open, driver logged in, waiting for match with rider

    -Liability coverage only, driver's policy is primary:

    -$50,000 bodily injury per person

    -$100,000 total bodily injury per accident

    -$25,000 property damage per accident

    -No collision, comprehensive, UM/UIM, PIP, or med pay

    -Liability coverage only, driver's policy is primary:

    -$50,000 bodily injury per person

    -$100,000 total bodily injury per accident

    -$25,000 property damage per accident

    -No collision, comprehensive, UM/UIM, PIP, or med pay

    Period 2: App is open, driver logged in, en route to pick up passenger


    OR


    Period 3: App is open, driver logged in, taking passenger to destination

    -Liability coverage of $1 million, driver's policy is primary

    -Contingent collision and comprehensive coverages up to actual cash value with $2,500 deductible

    -UM/UIM, PIP, and med pay may be available depending on requirements of state law

    -Liability coverage of $1 million, driver's policy is primary

    -Contingent collision and comprehensive coverages up to actual cash value with $2,500 deductible

    -UM/UIM, PIP, and med pay may be available depending on requirements of state law

    Next Steps

    If you were injured while a passenger in an Uber or Lyft car, this article will help you with the steps you should take and how you can pursue a claim against those responsible for your injuries.

    If you're a driver for another so-called "gig" company like DoorDash, Instacart, or Grubhub, some of the information in this article will apply to you as well. For instance, your personal auto insurer considers your driving work to be a business use and it will not cover claims that arise from any accident that happens while you're driving for the company. You should look into additional coverage that might be available from your insurance company, and you should check to see if the company you're driving for offers any insurance coverage.

    This article is intended to be for general information purposes. We've made no effort to address state-law-specific insurance requirements here. If you have questions about your own auto insurance coverage, you should consult with a knowledgeable insurance professional or attorney in your state.

    The insurance coverages we've discussed here (liability, collision and comprehensive, UM and UIM, PIP, and med pay) are only a few of those your auto insurance company offers. If you need other kinds of coverage, be sure to ask your insurance agent about what's available.

    Finally, here are the two most important takeaway points. First, if you drive for a rideshare company, you must tell your personal auto insurance company. Failure to do so means you're in breach of your policy, which might lead to financial disaster. Second, spend the money on a rideshare endorsement with ample coverage. If the worst happens and you get into an accident, you'll be glad you did. Better to be safe than sorry.

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