3 Need-to-Know Personal Car Insurance Tips for Uber Drivers

The last time I hailed an Uber, the driver asked me what I do for a living (I work for an online insurance agency). Over the course of the conversation, I learned two things:

1. Insurance’s reputation for being boring is alive and well.
2. The driver had no idea his personal car insurance didn’t cover his rideshare driving.

And he’s not alone. A survey of nearly 1,000 rideshare drivers found that more than 90 percent don’t have a rideshare-friendly policy. That means a lot of drivers are probably under the assumption that their personal auto policy is enough.

It’s not.

Here’s the scoop: when you charge for rides, you’re technically a freelancer in both the eyes of the law (for now) and the eyes of your insurance company. Insurance companies offer different policies for business-related driving, which means your personal auto policy likely doesn’t cover your rideshare activities—or anything you make money on.

In other words, if you get in an accident while you’re accepting ride requests, those damages may come out of your pocket.

Let’s break it down and look at three things you need to know about rideshare driving and insurance so you don’t end up with unexpected expenses.

Uber has become an integral part of our market. In tourist cities, Uber drivers get tourists from the airport to their hotels and around an unfamiliar city without calling a shuttle, tour bus, etc. In many cities around the country, people carpool to work and other everyday activities with Uber.

While there is a learning curve for everybody, Uber drivers are subject to certain rules. They are also protected by rules passengers are expected to follow. Personal policies aside, safety comes first. Whether you’re just getting started with Uber or if you’ve been doing it for awhile, there are a few things you should know.

1. Your insurance company can drop you if it finds out you drive for pay.

Again, by the insurance company’s standards, rideshare driving makes you a commercial driver. That means you are also a bigger risk after all, if you drive to make money, you’re probably on the road more than you would be otherwise. Your personal auto insurance wasn’t designed to cover that increased risk exposure.

If you’ve gotten a quote on a personal auto policy lately, you may have noticed they ask if you drive for any rideshare or other service. Whether you’re an Uber driver or a food delivery driver, at the very least, your insurance may not cover you while you’re on the job.

At the end of the day, an insurance policy is just a contract. Your insurance company issues the policy based on the information you provide. Throw a curveball by becoming a rideshare driver after the fact, and you’ve broken that contract. When you applied, your company never agreed to cover you for ridesharing. Worst case scenario, that means it’s free to walk away. They still have to give you sufficient notice to find another policy.

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2. You might be charged higher premiums for your personal car insurance later on.

After your auto insurance company cancels your policy, finding affordable car insurance becomes much harder. There are two major reasons why.

First, to avoid getting dropped again, you’ll need to be upfront about your rideshare activities. As we mentioned earlier, business driving is considered “riskier” and in the insurance world, that usually means more expensive.

Second, being dropped is a red flag for other insurance companies because it suggests you are a high-risk driver. Some companies may back away completely. Others may take you on, but at a higher cost. Insurers also ask if your policy has recently been cancelled.

If you let your insurer know when you start driving, they might offer a Rideshare policy to cover your personal driving and a gap between your personal driving and professional driving. Generally, you’ll need to either get your own commercial policies or use those offered by Uber for your collision coverage.

3. The Rideshare Company’s Coverage May Leave You with Gaps

Wait, you might say. Uber or Lyft’s insurance covers my driving!

If you’re at fault for an accident during what’s called “period 1” (the time when you’re online but don’t have a ride request), your insurance may not be enough. Ironically, both sides may avoid responsibility. Your personal insurance can’t cover commercial activity, and Uber’s policy only covers you while you’re on an actual job. Drivers should also know that Uber’s insurance:

1. Doesn’t cover vehicle damage. Those repair costs come out of your pocket.
2. Might not cover all the lawsuit costs. The rideshare company’s liability coverage is limited during this time frame, so you might be stuck paying for whatever amount exceeds the policy limits.

That said, unlike personal auto insurance, the rideshare company’s insurance can cover vehicle repair and liability costs for accidents that happen during “period 2” and “period 3.”

• Period 2: when you’re online and have a ride request.
• Period 3: when you’re online and have a rider in the car.

However, the deductibles are still pretty steep—and remember, you still don’t have much protection during that crucial period 1. So let’s look at some other options.

What Are The Best Car Insurance Options for Uber and Lyft drivers?

There are two ways you can get coverage for the driving you do while online and waiting for a rider:

1. Get a commercial auto insurance policy. If you get your own commercial coverage, it can cover vehicle damage and liability costs for accidents that happen during any of your rideshare duties.
2. Get a rideshare-friendly personal auto insurance policy. You’ll want to look for one that offers period 1 coverage to supplement your rideshare company’s insurance. Many insurance companies (including GEICO, Erie, Farmers, State Farm, and others) now have limited rideshare options. Your best bet is probably to Google “rideshare insurance” plus your state.

You might be tempted to roll the dice and forgo either option, but consider this: Commercial vehicle claims cost $45,000 on average. This includes property damage, injuries, and other liabilities. If you don’t have that kind of pocket change lying around, it’s smart to make sure your rideshare driving is covered.

What’s the easiest way to figure out what works for your needs and budget? Talk to an insurance agent who has experience insuring rideshare drivers. They can help you find the policy that meets your state’s coverage requirements and that protects you every time you hit the road.