Rideshare Insurance: How It Works and Why You Need It

Working for a rideshare service like Uber, Cabify, or Lytft is a great way to get some extra money on the side. However, we need to think about the type of coverage that we’ll need to do so. Therefore, doing our research on rideshare insurance beforehand is a must. This way we’ll make sure that we understand the potential risks and liability we’re exposed to. Getting a deeper insight into how rideshare insurance works and how to get an insurance policy is also a must. 

We should be aware of the fact that, by using our car for commercial purposes, our car insurance will change. This means we will have to get extra insurance if the one the company offers is not enough. Also, rideshare insurance works based on different coverage periods we need to know about. The good thing is that there are several insurers that offer rideshare coverage to make sure we are protected in case of an accident. 

One of the very first steps we should take care of when we decide to work with a rideshare company is understanding its coverage. More importantly, we need to evaluate all the different risks and possible mishaps we are exposed to as a rideshare driver. 

To begin with, we should know that if we decide to begin services through a rideshare app without getting extra coverage, our insurance company might cancel our existing policy. If we operate a vehicle for commercial purposes with personal car insurance only, companies might see it as a breach of contract. It could also mean higher risks; thus, they could opt to cancel our policy. 

Another reason why we should consider rideshare insurance is because companies like Uber or Lyft offer limited coverage only. Also, such coverage works based on different periods of the service. The extent of their coverage depends on the period of service we’re at. They have four different periods, each of them with a different level of rideshare insurance coverage. 

Understanding the four different periods described by rideshare companies is a crucial step of becoming one of their drivers. This way, we can make an informed decision when we decide to acquire additional insurance. Their periods are numbered from 0 to 3, depending on whether we have passengers on board or not. 

Period 0: This period is when our rideshare app is off, and we are not offering the service. Our personal auto insurance will provide coverage if needed. 

Period 1: We find ourselves in Period 1 when we turn on the app and wait to receive a request. From here on, our personal insurance stops providing coverage, and our rideshare insurance takes effect. We should keep in mind that companies like Uber and Lyft will offer very limited liability coverage. 

Period 2: This period begins when we have received a service request and are in our way to pick up the passengers. The company’s insurance policy will take full effect during this period and should offer extensive coverage.

Period 3: Once we have picked up the passengers and begin the trip to their destination, Period 3 is in effect. During this period, the company’s insurance policy should offer extensive coverage, too. It isn’t until we have completed the trip that we’re back into Period 1, with limited coverage. 

Before we contact a different insurance company, we should understand the coverage that rideshare companies already offer. Depending on the period of the service is the coverage that we will get. 

During Period 1, these companies offer liability coverage only. The coverage consists in $50,000 per person, $100,000 per incident, and $25,000 for property damage.

During Period 2, they offer liability and uninsured/underinsured motorist coverage for up to $1 million per incident. They also offer comprehensive/collision coverage for up to the value of your car. This only applies, however, if you have comprehensive/collision coverage from your personal auto insurance. The deductible for comprehensive/collision coverage is of $1000 for Uber and $2,500 for Lyft.

In order for you to purchase a rideshare insurance policy, the first step is to contact your insurance company and inform them. Letting them know in advance will eliminate the chances of them dropping your policy. Ask if they offer rideshare coverage and/or commercial coverage for vehicles in advance. 

Also, if our state doesn’t have rideshare insurance policies available yet, getting commercial insurance is the best alternative. Even though commercial policies might have higher premiums, making sure we are fully covered is always the best plan of action.