You’re required to carry liability insurance as a rideshare driver, but will Uber or Lyft’s own insurance also protect you?

Uber and Lyft are two of the most democratic “ rideshare ” or car-hire services. But how does automobile insurance work when you drive for Uber or Lyft ? Whose policy will cover a cable car accident that occurs when the driver has the app on and is waiting for a ride request, has accepted a travel and is on the way to the pick-up, or is driving a passenger ? Does the driver ‘s carrier step up, or the company ‘s, or both ? Do the answers vary depending on whether there ‘s injury or barely place damage ? Do the answers vary by state ? And who would an hurt Uber or Lyft passenger make a claim against ? Read on to get the answers .

How Uber and Lyft Classify Their Drivers, and Why It Matters

Uber and Lyft are “ rideshare ” services that compete with taxis and more traditional car transportation services. Uber and Lyft do n’t own or operate cars, and go to great lengths to not treat drivers as employees ; they prefer to treat them as independent contractors. This categorization is critical to the companies ‘ avoiding province for accidents or damage that happen when drivers are working : freelancer contractors are normally responsible for the results of their own negligence, whereas an employer normally covers the consequences of an employee ‘s carelessness. ( Learn more about employer liability for car accidents. )
It ‘s indecipherable whether or not these rideshare companies can continue to shield themselves behind the “ independent contractor ” controversy, particularly in the side of legislative efforts to have drivers classified as employees. In California, for example, a jurisprudence known as “ AB5 ” is meant to protect Uber and Lyft drivers ( and other alleged “ gig workers ” ) and make it more unmanageable for companies to argue that rideshare drivers and deliverypersons are not employees.

How Does Car Insurance Work for Uber And Lyft Drivers?

When Uber and Lyft began operations, they faced an enormous problem concerning their drivers ‘ policy coverage : Most of the drivers did not have commercial policies. alternatively, they had garden-variety personal policies, all of which exclude coverage when the vehicle is being used for commercial purposes. It ‘s slowly to see why : The indemnity company extends coverage ( sets the premiums ) based on its assessment of the risk of an accident and a claim ( the higher the risk, the higher the agio ). risk of a claim is well lower when the vehicle is used for personal use, as against being used to make money ( the swerve number of miles and hours on the road go way up when a vehicle is used commercially ). indeed, when person needs to drive for work, they normally need a commercial policy—whose premiums are much higher than those for personal policies. Uber and Lyft drivers would be nicely covered if they bought commercial policies, but the premiums are quite high and few drivers buy such coverage .

How Insurance Companies Understand Ridesharing

In the earth of ridesharing and policy, a driver ‘s time is divided into three phases, or periods. ( A driver who has the app closed is not in “ driver mode. ” ) Insurance coverage differs depending on when the accident occurs, as explained below .
Period 0: The app is closed .
Period 1. The driver has the app open, and is driving around and waiting for a nibble .
Period 2. The driver has been matched with a rider and is on the means to the pick-up .
Period 3. The rider is in the car and the period ends when the rider gets out .

What Happens When a Lyft or Uber Driver Has an Accident?

Let ‘s suppose now that an Uber driver causes an accident and injures person else, either the passenger or a third base party ; and that property damage is besides involved. The injured people make a claim on the driver ‘s personal indebtedness indemnity policy, asking the driver ‘s carrier to cover them ; and the driver makes a claim to his carrier wave under his collision policy, to take care of the place price to his car. But the insurance adjuster discovers that the car was being used to transport an Uber passenger, which is a commercial use not covered by the driver ‘s personal policies. The adjuster denies the claims. What ‘s more, the driver ‘s policy will credibly be cancelled, because the driver was violating the terms of the policy policy ( that he use the car only for personal trips, not commercial ones ) .
This result is a calamity for everyone involved. The parties injured by the driver must resort to suing the driver personally, and it ‘s a safe stake that most Uber and Lyft drivers are n’t flush with cash to cover medical bills and expensive property damage. The driver himself must repair or replace his cable car at his own price. surely there ‘s a better room to handle this result ?

Adding a Ridesharing “Endorsement” to Your Policy

In answer to the bare result precisely explained, some indemnity companies, in some states, stepped up. No, they did n’t revise their policies to include working as a Lyft or Uber driver as “ personal use. ” alternatively, they followed their play book by offering extra coverage—at an extra price. A ridesharing endorsement, covering liability and property damage to the driver ‘s car, is much less expensive than commercial coverage, but it ‘s not available in all states, nor does it cover you in all periods ( some covering merely Period 1 ).

understand that without this endorsement, even if you ‘re precisely trolling and waiting for a match, your personal policy carrier will consider you to be engaged in commercial activity—and it wo n’t cover you .

Insurance Offered By Uber and Lyft

Uber and Lyft recognized that the endorsements offered in some states by some indemnity companies were not sufficient to protect their drivers. So they offered indemnity of their own, but it ‘s of very limited value and it comes with a nasty surprise. hera ‘s how it works .
Period 0: When drivers are in their vehicles but are not logged into the Uber or Lyft app. The driver is not in alleged “ driver mode, ” so the driver ‘s own personal cable car indemnity coverage will apply to any accident that occurs, and Uber ‘s or Lyft ‘s indemnity coverage will play no function .
Period 1: When drivers are logged into the app, but have not yet accepted a ride request. Uber and Lyft provide liability coverage for any accident that is the blame of the driver if the driver ‘s own policy does n’t apply. This is third-party policy ; it covers alone losses sustained by others who were injured or had their property damaged. It does not cover the Uber or Lyft driver ‘s own injuries or fomite damage. This liability coverage pays :

  • $50,000 per person injured in an accident caused by the Uber or Lyft driver (that’s the most that one injured person can receive; again, does not cover the driver’s own injuries)
  • $100,000 total injury liability per accident (that’s the most that Uber or Lyft will pay for injuries, regardless of how many people were injured, or how badly they were hurt; again, it does not cover the driver’s own injuries), and
  • $25,000 property damage liability (that’s the most Uber or Lyft will pay for any vehicle or property damage resulting from the accident; again, it does not cover damage to the Uber/Lyft driver’s own car).

From reading the above, you might naturally conclude that your worries are over—Uber and Lyft will take care of it, correctly ? Well, not precisely. The coverage barely explained is “ contingent ” coverage. That means that it will step up alone after you ‘ve made a claim on your own policy foremost ( Uber and Lyft wo n’t even give you the benefit of their policies until you prove that you have your own policy ). So hera ‘s what you ‘ll be facing :

  • If you haven’t purchased a ride sharing endorsement and your company denies the claim (which it will, because you’re driving commercially), Uber’s insurance will step in.
  • If you have an endorsement, your policy will cover you, and Uber’s and Lyft’s will take care of any excess that your policy can’t meet. Note that your own policy must be tapped first (it’s “primary,” in insurance lingo), and in many cases, Uber’s or Lyft’s policies will not be needed (a result they carefully provided for).

But hera comes the cruddy surprise for drivers who do n’t have the profit of a ridesharing second : Because you ‘ve been driving commercially, and have made a claim on a personal policy, you ‘re in trespass of your policy, and the company will credibly cancel your insurance. That ‘s not the solution you wanted. And to make matters worse, if the damage and injuries surpass the rather minor policy limits offered by Uber ‘s and Lyft ‘s policy, victims can always sue you for the excess .
Laws in some states vary the rules barely described. In California, for model, carriers ca n’t offer contingent liability policy. This means that California drivers must either buy a commercial policy or a ridesharing sanction for their personal policies .
Periods 2 and 3: When the driver has accepted a trip/ride , until the rider gets out. Uber and Lyft provide liability coverage in the measure of $ 1 million. so, this liability coverage would apply to injuries sustained by a customer who is riding in an Uber or Lyft car, whose driver causes an accident. It would besides apply to injuries and fomite damage sustained by anyone who is hit by an Uber or Lyft car when the ridesharing driver is found to be at demerit for the accident. But again, the indebtedness coverage wo n’t cover injuries sustained by the Uber or Lyft driver.

As explained above ( Period 1 ), drivers who have endorsements will see any claims go foremost to their own carriers, with the Uber & Lyft policies kicking in if the damage amounts exceed the policy limits of the driver ‘s personal policy .
There is some good newsworthiness, however, when it comes to damage to the ridesharing driver ‘s car, regardless of whom or what caused the implicit in incidental. Unlike the situation in Period 1, in Periods 2 and 3 Uber ‘s and Lyft ‘s collision and comprehensive policies kick in. But once again, this is “ contingent ” coverage, which means that it will work like this :

  • If you have an endorsement, your personal policy will pay first, and the Uber or Lyft policy will cover any damages that exceed the limits of your policy. But the coverage is low: The limit is the vehicle’s actual cash value, subject to deductibles (Uber’s is $1,000, while Lyft’s is $2,500).
  • If you do not have an endorsement, you’re in a bad spot. You won’t get the benefit of the Uber or Lyft coverage until you’ve presented your claim to your personal carrier first. But by making a claim on your own carrier, you’ve alerted them to your violation of your policy terms, which risks termination of your policy. Getting the slim coverage provided by the Uber or Lyft policy will be cold comfort.

Uninsured Motorist Coverage

What happens if an Uber or Lyft driver is hit by an uninsured or underinsured driver in an accident that is not the mistake of the ridesharing driver ? Uber offers a policy for such incidents in Phase 3 only, with a limit of $ 1 million .

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