Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 20, 2021

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Ridesharing has become very, very popular in recent months, with services like Uber and Lyft essentially replacing private cab companies with a massive fleet of everyday drivers.

While this sounds great for those looking for a cheap, clean alternative to a taxi, there are plenty of issues when fast moving vehicles are involved.

Aside from the safety concerns of both drivers and their passengers, one nagging issue that just won’t seem to go away is car insurance coverage.

Is it mandatory for drivers to have their own personal auto insurance policies?

First and foremost, both Uber and Lyft require drivers to have their own personal auto insurance policies.

But what’s unclear is if you’ll actually be covered in the event of an accident while using your own personal vehicle to provide commercial ridesharing services.

Recently, both companies upped their insurance coverage, but some gaps still seem to be present.

The whole thing is still very murky with regard to how the driver’s personal auto insurance coverage comes into play, if at all.  Let’s take a closer look at two of most popular ride-sharing companies currently in business.

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What’s included in Lyft car insurance coverage?

What Lyft currently provides to its drivers in the way of insurance:

– $1 million excess liability policy
– Uninsured motorist coverage
– Underinsured motorist coverage
– $50,000 contingent collision coverage

All of this coverage is intended to “drop down and act as primary insurance” if a driver’s personal insurance policy doesn’t cover an incident for whatever reason.

So if a Lyft driver gets into an accident while driving a passenger somewhere and causes property damage or bodily injury, the $1 million excess liability policy will come into play if that driver’s personal auto policy denies a claim. Or if the claim is large enough to where supplemental coverage is needed.

The $1 million excess liability policy also covers Lyft drivers if they are hit by an uninsured or underinsured driver that is deemed at fault for the accident.

Additionally, Lyft provides $50,000 (maximum) in contingent collision coverage to rideshare drivers who have purchased collision coverage on their own personal policies.

So if a Lyft driver is at fault for an accident and their own collision coverage is exhausted (or denied) as a result, the contingent collision coverage comes into play.

For the record, collision car insurance is coverage for damage you do to your OWN vehicle. So if you hit another driver and damage your own car, this supplemental coverage may be triggered.

But it’s only for up to $50,000 and requires a hefty $2,500 deductible, a number that’s probably higher than the deductible on your own car insurance policy.

And if you drive a particularly expensive vehicle, that $50,000 might not be enough. So if you drive a Mercedes and plan to drive for Lyft, take notice.

Also note that it’s collision coverage, not comprehensive coverage. If you sustain damage to your own vehicle in another way (other than collision), Lyft doesn’t appear to provide any assistance.

To view the certificate of insurance, you can open the rideshare app and tap on the ‘Vehicle’ in the menu. Your personal auto coverage applies when the app is off. When it comes to coverage when the app is on, and waiting for a ride request, Lyft provides third-party liability insurance for covered accidents if your personal auto policy does not apply.

Their primary liability insurance starts from the time drivers accept the ride request until the time the ride has ended in the app. If you already have a commercial insurance policy, Lyft’s policy will continue to be excess to your insurance coverage.

In the event of a covered accident with an uninsured driver and is ultimately at fault for bodily injury caused to your/your passengers, uninsured/underinsured coverage will apply. Coverage limits vary by state and there’s no deductible on this coverage.

What’s included in Uber car insurance coverage?

uber insurance coverage

What Uber currently provides to its drivers in the way of rideshare insurance:

Uber has a more complex rideshare insurance structure, which breaks down the coverage by “available but not on trip” and “during trip.”

In other words, when Uber drivers are en route to pick up a passenger, the former applies, and when they have a passenger, the latter applies.

When available but not on a trip, the following insurance coverage is provided by Uber:

– $50,000 injury
– $100,000 injury total
– $25,000 property damage
– (See source)

These three types of coverage are all liability coverage and are all contingent on your personal auto policy completely declining or paying nothing for a claim.

If an Uber driver gets into an accident en route to picking up a passenger, this 50/100/25 structure drops down after primary coverage is exhausted or denied.

Again, there isn’t any collision or comprehensive insurance for your OWN vehicle, so if you get into an accident along the way and it’s your fault, you better hope your primary auto insurance covers the physical damage.

When on a trip, the following insurance coverage is provided by Uber:

– $1 million 3rd party liability
– $1 million UI/UM coverage
– $50,000 comp/collision coverage

Recently, Uber stepped up their game and added contingent collision AND comprehensive coverage to drivers while on an Uber trip.  Check out the difference between the two here.

If you originally purchased collision and/or comprehensive coverage on your personal auto insurance policy and sustain damage to your vehicle, and your insurer won’t pay a claim, Uber’s coverage kicks in.

It offers $50,000 per vehicle with a $1,000 deductible, so again, if you drive a really expensive car, it might not cut it. But for most it should be sufficient.

So Uber provides comp and collision, as opposed to just collision, and does so with a much lower deductible than Lyft, which is good news.

But for drivers technically working and on their way to pick up a passenger, there’s still a gap in coverage.

What’s included in Sidecar car insurance coverage?

What Sidecar currently provides to its drivers in the way of insurance:

I added Sidecar, which I don’t believe is quite as large as Lyft and Uber, but definitely a major player in the ridesharing business.

Similar to the other companies mentioned, Sidecar offers limited car insurance coverage to drivers, though it’s only activated when a Sidecar driver has accepted a ride through the rideshare app, and ceases when the passenger exits the vehicle at the end of their trip.

Sidecar offers a commercial automobile liability insurance policy with up to $1 million in coverage per occurrence, though they don’t specify if it’s primary or secondary coverage.

The liability-only policy covers drivers for property damage and/or bodily injury to passengers and third parties for up to $1,000,000.

However, Sidecar drivers do not receive coverage for their own vehicles, and there’s no mention of uninsured/underinsured motorist coverage (See source).

To sum it up, a lot of question marks remain, namely, if ridesharing is actually covered by a personal auto insurance policy.

It sounds like there’s a lot of uncertainty, and Lyft and Uber are just doing their best to increase and widen coverage to eliminate more potentially bad situations.

Another big question is whether Lyft and Uber drivers are telling their insurance providers that they are in fact drivers for this rideshare service.

Ideally more clarity on the situation will allow drivers to communicate more openly with their car insurance companies in the near future.

(photo: Alfredo Mendez)