This article assumes that you have come here looking for information about Lyft and Uber insurance. That being said, I will presume you don’t need an explanation as to what these services are and that you already have a basic knowledge about how a Transportation Network Company (TNC) works. If that is not the case a simple Google search can get that info for you.
Why won’t a regular car insurance policy provide Lyft or Uber insurance?
Typical personal auto insurance policies are just what the name suggests, for personal use of your automobile (as opposed to commercial). Traditionally, public livery (driving someone around for a fee) was only done by companies that specialized in such a business like taxi companies, limo services, etc.. Such commercial use is traditionally covered by commercial auto insurance which was appropriate because those types of vehicles typically are not used for personal use when not driving passengers from place to place. However, the new paradigm of dual-use vehicles created a grey area which needed to be addressed with car insurance policies taking into account both personal and commercial use. Lyft and Uber insurance is designed to do just that.
Will any company provide Lyft or Uber insurance?
So, back to the issue at hand: Will your car insurance cover you while driving for a rideshare company such as Uber or Lyft? Not that long ago, the answer would be a resounding “NO!” but insurance companies are slowly coming around to realize that this is a market they might want to tap into. However, rather than try to reinvent the wheel by creating an entirely new auto insurance product, the best and most common solution has been to offer an endorsement on the personal auto policy to cover such exposure (fancy insurance word for the risk of loss). While still relatively rare, some companies have stepped up with such endorsements, with more being added all the time.
To understand what such an endorsement covers, it is first useful to understand what coverage you lose by NOT having the endorsement. Typically, your auto insurance will cover you for all driving you do that is not commercial in nature. However the line between personal use and commercial use is blurred when you drive for a TNC. To ease the understanding, we should first define the relevant ‘stages’ of a TNC ride:
- Period 1: That time when a driver has turned on the app and is waiting for a ride to be assigned;
- Period 2: That time when the driver has been assigned a ride and is on the way to pick up the passenger;
- Period 3: The time when the passenger has been picked up until the passenger has been dropped off at his/her destination.
Pretty much every personal auto policy will explicitly exclude coverage for Periods 2 and 3. Not to worry though, those are the periods that the TNC’s insurance will cover. The problem lies with Period 1 when you are in that grey area of waiting for a dispatch but not technically driving for the TNC. This is the period that creates the loophole that insurance companies throughout the country are scrambling to close. (Obviously, they don’t want to end up providing Lyft or Uber insurance without pricing for it properly.)
Here in California, the politicians have done it for them by passing a law that says, without a specific endorsement, a personal auto policy cannot cover Period 1 exposure. It goes further to say that either the driver must purchase their own Lyft or Uber insurance or the company must provide it for them. Keep in mind though that this only refers to Liability insurance, that coverage that pays for the other person’s damage and/or injuries (including the passenger). No coverage exists for damage to your car, or injuries that you suffer in the accident. So, if while you are driving to an area with high demand for Lyft and Uber rides and you get slammed by a driver without insurance, you are out of luck, more specifically out of a car and out the cost of your medical expenses, time off of work, etc. If you want all of your policy coverages to apply, you need to buy Lyft or Uber insurance.
What if I don’t tell my insurance company I drive for a TNC?
Unfortunately, this is the most common ‘strategy’ being employed by TNC drivers. Obviously though, insurance companies are hip to this now. (Insurance companies… hip… Those words just don’t belong in the same sentence, do they?) As a result, “Do you ever drive for compensation?” or something like that is finding its way into just about every company’s accident investigation routine. Now if someone (not you… someone else…) were to lie and say they don’t drive for a TNC when in fact they do, “someone else” would be technically be guilty of insurance fraud. Believe me when I say, lying during an accident investigation has been prosecuted before, it will be prosecuted again and it is a felony. Does that mean they will prosecute everyone that does it? No. But it’s certainly not a chance *I* would ever take.
Where can I get Lyft or Uber insurance?
As of this writing, eight companies have had rideshare endorsements approved by the California Department of Insurance. They run the gamut from large companies (Mercury, Farmers) to smaller or eligibility-limited companies (USAA and Metromile). As with regular auto insurance, rates, service and coverage can vary greatly from company to company. One company, MetLife, will do Lyft insurance but not Uber insurance in California.
Now if you’re not in California, all bets are off. Each state is handling Lyft and Uber insurance differently and in many states it is not yet available. Check with a local independent agent to find out what options are available in your state.
How much does Lyft or Uber insurance cost?
Of course, one of the foremost questions is which company has the best rate for Lyft and Uber insurance. That, my friends is my next project. I hope to have a rate comparison available in the near future. Stay tuned…
I can say this, however, it is not necessarily as expensive as you might think. In some cases it is just a matter of rating the cars for additional miles driven or for basic business use. So likely the increase wouldn’t be dramatic like 50% or higher, more like 10%-25%.
Bottom line: The added insurance cost is well worth making sure that you are covered to the full extent of your insurance policy. To make sure your car gets fixed, to make sure you’re covered for injuries and to give you the peace of mind that your effort to earn some money doesn’t instead result in financial ruin.
(PS: It’s been pointed out to me that this article was uber-dry, without the usual humor lyft that I try to give my articles. For that I apologize and I will try to give my next article some humor, if even just a TNC (teensy) bit.)