Being an Uber, Lyft or any other ridesharing service driver has increased in popularity due to its potential to provide decent main and secondary income. What many of these drivers may not realize, however, is their car insurance may need an update. Rideshare companies have grown fast, and laws and insurance companies have struggled to keep pace. Uber and Lyft have been around for a few years, but car insurance policies in many parts of the country have not adjusted to accommodate this new form of commercial driving; leading to instances of financial trouble for drivers.
If you own a car, you probably already have an insurance policy. Unfortunately, it's not going to be enough to completely cover you while driving for a rideshare service. If you drive your car without specifying you are using it for business purposes, then you have a personal policy. A taxi service is considered a business use. Thus in the eyes of your insurer, if you crash while doing something you weren't technically insured for, they are not obligated to pay out for the claim.
What's The Difference Between Pleasure and Rideshare Driving?
You enter the realm of rideshare driving as soon as you enter the first of three defined stages. Stage one begins when you turn the app on, saying you are looking for a passenger. Stage number two starts when you are matched with a passenger on the app, and you need to go pick them up. The third and final stage is when the passenger is in your car and you are driving to drop them off. As soon as the app is off, you go back to pleasure driving, and your normal policy covers you once more.
Uber and Lyft will fully cover you in the event of an accident during stages 2 and 3. If an accident occurs during the first stage however you can find yourself in an insurance gray zone. Uber and Lyft provide a "contingent" coverage for stage 1, but it's hardly enough in most cases, and won't even cover any damage to your car or yourself. If you decide to file a claim with your insurance company, not only can they deny the claim, they may also drop you from their service. The "Gap" in coverage has put thousands of rideshare drivers at risk of financial ruin.
Large name insurers are beginning to provide policies with rideshare coverage to protect drivers. GEICO, for example, offers "hybrid" coverage, which is a mix of a personal and commercial policy, but is not as expensive as a full commercial policy. Additionally, Progressive and Erie have added rideshare coverage to personal policies that select "business" when filing for a personal policy. Most other insurers such as Farmers, Allstate and State Farm, made it even simpler and created an endorsement you can add to your personal policy that will cover the first stage of Uber driving. This is commonly referred to as "gap coverage".
Gap coverage is relatively cheap. For example, the endorsement costs an extra $15-$20 with Allstate. The problem with the gap coverage however is that you will already need to have a policy with that company to get it.
Your Mileage May Vary State-to-State
Not every state has coverage available yet. GEICO and Farmers provide solutions for sixteen states, and Allstate offers gap coverage in just four. States like Ohio and Arizona have lots of options to choose from, while New York, Michigan, and Florida have no coverage at all for rideshare drivers.