What Kind of Coverage Do I Need for Uber or Lyft Work?

Are you looking for a flexible side hustle with a decent earning potential, and have you always loved driving and talking to people? Rideshare work may be the answer you have been looking for. People working with Uber, Lyft, and smaller rideshare providers are independent contractors who use their personal vehicles to transport passengers in need of a ride. They can work as little or as much as they like, driving people whenever they have time.

Recent surveys suggest that diligent drivers can earn around $14 per hour (plus tips!). This kind of work has the potential to supplement your income or help you save for a large purchase, and some people even manage to make a full-time living this way. 

However, it’s important to know what you’re getting into before you apply to drive for one of these app providers, and that includes examining the extra costs you will incur because you use your vehicle for business reasons. Despite the fact that you drive your own car, your personal automotive insurance won’t cover commercial use! This guide explores the kinds of coverage you’ll need as a freelance driver for a large platform.

  1. Rideshare Insurance

Ridehailing drivers find themselves in a unique position. If you join their ranks, you’ll use your vehicle to transport passengers for a fee (which is, obviously, a commercial activity), but you will also almost certainly continue to use your car for personal purposes when you aren’t working. 

Personal insurance policies have restrictions banning drivers from using their cars for commercial reasons, while many commercial insurance plans put you in the exact opposite situation — restricting coverage while you’re driving for personal reasons. 

Rideshare coverage is a handy bridge that allows you to enjoy the best of both worlds. You’ll get commercial coverage while you’re on the job, and personal insurance when you’re off the clock. Perfect!

To break that down a little further:

  • The personal part of the plan has you covered when your carsharing app is off, just like it did before you started your new job. The same is true if you’re ready to accept a ride but haven’t yet done so. 
  • The commercial portion of your plan kicks in as soon as you accept a passenger, before even picking them up. It remains in force until the ride is complete, at which point your personal coverage takes over again.

The main advantage of this one-of-a-kind insurance type is its affordability — you generally won’t add more than $25 per month to your traditional policy. Unfortunately, it’s not available everywhere. In states where this is the case, commercial policies are your only option. They’ll serve the same purpose, but with an additional price tag.

The insurers that offer policies targeted at carsharing drivers and on-demand delivery drivers include Allstate, American Family, Farmers, Mercury, State Farm, and USAA. 

  1. Liability Coverage

Uber and Lyft both provide third-party liability coverage for their drivers. This kind of insurance protects you during different “stages” of your driving period, including:

  • While the app is on and you’re waiting for a request, you’ll have coverage of $50,000 per person and $100,000 per car accident when it comes to personal injury. You’ll also benefit from property damage coverage to the tune of $25,000.
  • When you’re en route to collect a passenger, you’ll enjoy liability coverage of up to $1 million, as well as full uninsured and underinsured motorist, comprehensive, and collision insurance. This level of protection continues while you drive until the passenger reaches their destination.
Uninsured and Underinsured Motorist Coverage

Despite the coverage these companies offer, drivers will still need uninsured and underinsured motorist coverage. This type of insurance plan will protect you if you are involved in an at-fault accident or collision with a driver who isn’t armed with the appropriate level of coverage. 

This plan — which every driver should ideally carry,  regardless of whether they drive for a ridesharing provider —will protect you whenever you’re not actively working. 

  1. Comprehensive and Collision Plans

Every driver also requires these kinds of insurance coverage. 

Comprehensive auto insurance has you covered if anything unexpected should happen to your vehicle, including as a result of acts of nature, theft, and vandalism. Collision insurance protects you and third parties in the event that you cause an accident. This includes hitting another car, crashing into a stationary object like a traffic light, or sustaining damage as a result of being forced off-road. 

Check with your insurer to make sure you understand precisely what is and isn’t covered under your plan, because the specifics can vary from one policy to the next. 

  1. Rental Car Insurance 

Finally, some drivers may opt to use a rental car to drive passengers. Not every company allows this practice, but if yours does, you are most likely to need it while your car is being serviced, but you still want to keep working. You’ll need rental car coverage in these cases (but you should also check in with your company to make sure it’s OK to drive a rental vehicle!). 

  1. A Final Word

So, you’re considering driving for Lyft, Uber, or another on-demanding ride app company? Auto insurance is always central to your quest to be a responsible driver, but it becomes even more critical when you work for a ridesharing app. Unfortunately, navigating the insurance landscape as a freelance driver can be a little tricky. 

We hope this quick guide gave you a better idea of what to expect. Rideshare coverage and endorsements ensure that investing in the additional protection you need to get started with this side hustle doesn’t necessarily have to be painful. For as little as $20 to $30 a month extra, you can be fully protected during every stage of the driving process — and while you’re using your vehicle for personal reasons.

Make sure to shop around for the best offer because the costs of rideshare policies vary significantly. If you approach your quest for the best coverage the right way, your premiums won’t eat into the money you make driving too much!