What Uber & Lyft Drivers Should Know About Auto Insurance

With hundreds of thousands of people currently driving for Uber and Lyft and that number growing every year, it's safe to say that driving for a ridesharing service is an increasingly popular way to make money. Whether you are looking to drive for Uber or Lyft as a way to supplement your income or you want to make it your full-time gig, it's important to do your research first.

One potential complication is the impact driving for a rideshare service may have on your car insurance. Here are the key points to consider about car insurance for Uber and Lyft drivers:

Car Insurance for Uber Drivers Is Complex & Still Evolving

Car insurance for Uber and Lyft drivers continues to evolve and change as the ridesharing industry grows. Full-time taxi drivers and other commercial drivers have typically been required to have a commercial driver insurance policy in addition to their personal coverage. This is not the case for most Uber or Lyft drivers, however, since most drive part-time on a flexible basis and drive their own cars instead of a company vehicle.

Another complicating factor is that Uber and Lyft consider their drivers independent contractors rather than employees. This leaves rideshare drivers in an auto insurance gray area: most personal auto insurance policies don't offer enough coverage if they get into an accident while working, but commercial policies aren't quite appropriate either.

Uber and Lyft Do Provide Additional Coverage

Luckily, both Uber and Lyft provide their drivers with additional coverage. In fact, both companies have $1M liability policies for their drivers. This means that if you are in an accident when driving a customer for Uber and it's your fault, Uber's liability insurance will kick in and pay up to $1M in medical bills as well as repairs to the other driver's vehicle. Both companies also have insurance policies in place to protect their drivers and passengers in cases where they are hit by an uninsured driver.

There is a caveat, though: these insurance policies only kick in when you are logged into your Uber or Lyft app as a driver and actually working. If you are logged into the app but haven't been assigned a customer yet, you may not be protected by either your personal policy or the ridesharing company's policy.

Insurance companies are racing each other to come up with policies specifically tailored for Uber and Lyft drivers that protect drivers during this "in between time." These policies provide the usual personal auto insurance coverage while also adding additional protection for ridesharing. The availability of ridesharing insurance policies varies greatly by state.

You Must Let Your Insurance Company Know

Some Uber and Lyft drivers are afraid to let their car insurance company know they drive for a ride sharing company because they're afraid their rates will go up. This is a mistake, however, since you are most likely required as part of the terms of your policy to disclose this information.

There is a risk of your auto insurance company dropping you—not because you drive for Uber but because you drive for Uber and didn't notify your auto insurance provider. When you let your insurance company know that you are an Uber driver they will be able to help determine if you need special ridesharing insurance, commercial insurance, or neither.

While insurance for Uber and Lyft drivers is a complex and still evolving issue, it's one that can be navigated with the help of a good insurance agent. Your auto insurance agent knows the ins and outs of insurance laws in your specific state and will help ensure you are protected.