What Insurance Does an Uber or Lyft Driver Need?

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CARS.COM — If you drive for a ride-hailing company like Uber or Lyft, or if you're thinking of joining one, insurance coverage can seem like a secondary concern or something too complicated to tackle. But it's more important than you think — and inaction could put you at risk.

Related: Report: Insurance Premiums Climb for Not-At-Fault Accidents

Ride sharing, sometimes called ride hailing, is big business — about one in four Americans use ride sharing today, according to J.D. Power and Associates. That volume has propelled plenty of drivers to join; Lyft alone claims some 700,000 drivers. Insurance has caught up in many states, with products introduced in recent years that fill in the gaps from the coverages offered by ride-hailing companies. But the specifics get complicated fast. Not to worry: We reached out to several large insurers plus Uber, Lyft and a few insurance experts to answer some questions.

There's one important caveat, though. When it comes to insurance coverage, state laws influence a lot. Use this as a general primer, but call your insurance provider and your ride-hailing company to get specifics for your state.

Got it? Good. Here we go.

Doesn't my personal insurance cover me if I'm driving for Uber or Lyft?

Generally not. Steven Weisbart, a senior vice president and chief economist at the industry-backed Insurance Information Institute, notes that almost all insurance companies have coverage exclusions if you drive for commercial activities, including ride-sharing programs.

"We have, essentially, a commercial activity on the one hand, a personal activity on the other," Weisbart said. "Private policies cover personal [but] exclude commercial, and that's pretty conventionally settled across — as far as I know — across every state."

That's because insurers separate business-related driving from the commuting or leisure-related driving covered in private policies. If you're driving for Uber or Lyft, "you may be on the road all day," Weisbart said. "Whereas you might stay home if it's lousy weather, you're now out trying to make a buck. ... From an insurance point of view, this is a different animal."

But I thought ride-hailing companies provide insurance to cover this.

In many cases, they do. If you've accepted a fare and are driving to pick up passengers or take them to their destination, Lyft and Uber both furnish $1 million in primary liability coverage for any damage you may cause, plus another $1 million in coverage if you're hit by an uninsured or underinsured driver. Both companies specify this as primary coverage, though not necessarily if you have a separate commercial insurance policy.

Do those policies cover my car itself?

It depends. In that same timeframe — from when you accept a fare to when you drop them off — Uber and Lyft cover your car in the event of a collision or comprehensive claim (e.g., vandalism), but only if you have collision and comprehensive policies in your personal policy. Uber covers up to the cash value of your car with a $1,000 deductible; Lyft caps the maximum at $50,000 with a $2,500 deductible.

Do I have to tell my insurance company if I get in an accident while driving for a ride-hailing company?

Both Uber and Lyft advise that you contact them (that is, Uber or Lyft) after an accident. Lyft advises you contact your insurance providers, too, and furnish your personal coverage as evidence at the scene of an accident if necessary.

Wouldn't that put me in hot water with my insurance company?

Experts say it's unlikely. Your insurance company will simply apply the commercial exclusion and advise you to "go back to your ride-hailing company and tell them they're on the hook," said Penny Gusner, an analyst for Insure.com.

Weisbart echoed that, though he said news of the accident might cause a rate increase: "They may also say, 'Well, you're maybe not as safe a driver as we thought, and we will maybe hike your personal premium,'" he said.

Should I tell them beforehand that I drive for a ride-hailing company?

Yes. Insurance companies don't want ride-sharing drivers to go incognito, Weisbart said. And Gusner advises consumers to consider insurance in tandem with ride-sharing.

"My main concern for drivers is that they think about insurance as they sign up — not as they're on the route with their app on and thinking, 'Oh, I wonder if I'm covered now,'" she said. "That's not the time to think about insurance consequences."

Won't they penalize me for that?

Probably not, but it depends. Officials at Allstate and Farmers Insurance said they wouldn't raise rates simply because you told them you drive for a ride-hailing company like Uber or Lyft. And Stacey Gorsuch, a product manager in State Farm's casualty and underwriting department, told us a disclosure alone that you're driving for Uber or Lyft "does not necessarily mean that there's going to be a price increase associated with that particular use."

Weisbart doesn't think much reason exists for an insurance company to jack up rates simply because you drive for a ride-hailing company, as commercial exclusions already exist for those situations.

"It's as though you weren't driving at all, as far as they're concerned," he said. "Once your status is accurately communicated to the insurance company, they're pretty much happy with what they have."

Still, that isn't always the case. Insurers might drop you if they think you're too much of a risk, Gusner warned, and they'll probably try to sell you on extra products for ride-sharing drivers.

They could also deny coverage. Dave Pratt, a business leader at Progressive, said the company allows new customers to specify that they work for a "TNC" — a transportation network company, the industry's designation for ride-hailing firms. But "TNC drivers won't be able to obtain a standard personal auto policy in states where we don't yet offer coverage for TNC activity," Pratt wrote in an email.

Do insurance companies offer specific ride-hailing coverage?

Yes. It's generally called a ride-sharing endorsement, something that augments existing personal insurance but stops short of a full commercial policy. It's become widespread. At least a dozen major insurance companies offer something, according to Insure.com. Among them are big players like Allstate, Geico, Farmers, State Farm and Progressive. But coverage varies by state. Most insurers are working to increase availability, but Allstate told us it offers the endorsement in just 29 states, while State Farm has it in 23 states; Progressive has it in only two states.

Such policies offer protection in periods before full coverage from ride-hailing companies kicks in. They can also offer lower deductibles or extended coverage beyond what ride-hailing companies offer.

Pricing varies. Allstate says its endorsement runs as little as $1.25 a month, while State Farm and Progressive said their endorsements can add 15 to 20 percent to your premiums, though specifics policies vary. Farmers said its endorsement adds 8 to 30 percent over a typical policy. Still, those additions are far cheaper than commercial insurance, which can cost multiple times more.

Why should I pay for more insurance if Uber or Lyft already provides it?

There's more gray area than you think. If you have the Uber or Lyft app open but haven't accepted a fare yet, you're technically still on the job — and the commercial exclusions from your own insurance are likely to apply — but both companies' core policies haven't yet kicked in. Uber and Lyft provide scaled-down liability policies during this period: $50,000 per person, $100,000 per accident and $25,000 in property damage in this period, though they can vary depending on specific local laws.

Those limits are a fraction of the full $1 million policy, and neither company offers any collision or comprehensive coverage on your car during this period, Insure.com says. The website warns a major accident could easily overrun the liability limits to leave you paying the difference. And if you lease your car, those limits are insufficient for what most lease contracts require, warned Mariel Devesa, head of product innovation at Farmers.

Gusner said this period is the "riskiest" timeframe while you're driving for a ride-hailing company, and Allstate vice president Geoff Williams called it "gray space" in your coverage where most commercial exclusions from your personal insurance technically apply. Gusner also warned that someone involved in an accident might assume you're covered by a ride-hailing company and press for maximum damages: "They think Uber is going to take over," she said, "[but] you're just driving with the app on."

That's where the endorsements come in. They can provide fleshed-out coverage (including collision and comprehensive coverage on your own car) in that initial period beyond the smaller liability policies furnished by Uber and Lyft. Some endorsements also augment the main coverage offered by ride-hailing companies, lowering deductibles or adding coverage for your own injuries — something that may not be covered by ride-hailing companies' policies, CarInsurance.com warns.

Once those extras are offered to me, will I be forced to buy them?

Not necessarily. Allstate says it offers the endorsement whenever policyholders disclose that they work for ride-hailing companies, and about 60 percent of them agree to it. But the rest don't, Williams said, because they drive infrequently, think they're safe drivers or just have a higher appetite for risk. And because ride-hailing companies provide some coverage during even the riskiest periods, it's still legal — if riskier — to drive without the endorsements, he added.

If I got in an accident during the first period, couldn't I just turn off the app and file a claim with my insurance company?

That could get you in a lot of trouble. Gorsuch called it "deceitful behavior," and Gusner warned it risks legal trouble, not to mention the financial hit if your claim gets denied. Williams said ride-sharing status isn't something Allstate tries to coerce out of its policyholders, but the company always investigates any accident claims, and such investigations could uncover that you drive for a ride-hailing provider.

Farmers' Davesa said "some drivers" try to claim personal driving after a ride-sharing accident, but ride-sharing companies have ways to track exactly what you were up to.

"That would be fraudulent activity, but there's also — in the investigation of the claim, there's other processes that are done," Devesa said. "We can validate whether they're a [ride-share] driver and with what company and what period of time they were in."

Can I get the extra coverage in every state?

No. By CarInsurance.com's tally as of Jan. 24, 44 states and the District of Columbia have at least one major insurance company with ride-hailing endorsements. The holdouts? Alaska, Hawaii, Mississippi, New York, North Carolina and Virginia. But the website says 10 states — Arkansas, Florida, Massachusetts, Michigan, Montana, New Jersey, New Hampshire, Rhode Island, South Dakota and Vermont — only have one major insurance provider with such endorsements, which limits your ability to shop around.

What do I do if I'm in a state where those endorsements aren't available?

Talk to your insurance provider. Allstate cautioned that options will vary depending on the region, as states must set up legislation around ride-sharing insurance before companies can offer a product for anyone in a ride-hailing company.

"For us to cover a policy and set up this structure, we need that legislation in place," Williams said. "There's some other states that are pretty close, whether it's sitting on the governor's desk or in [the process of] legislation. And there are states that are not close at all."

Is there a scenario where I'd have to get a full commercial policy?

Your insurer might ask you to do that if you drive for Uber or Lyft all the time. "If you're a full-time Uber [driver], they might say, 'You know, this is too much risk for us; you'll have to get a commercial policy,'" Gusner said. "They can request your mileage and might even send somebody to look at your mileage if they believe that, and they see that you've put on 25,000 miles when you usually do 7,000 miles a year."

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Senior Consumer Affairs Editor Kelsey Mays likes quality, reliability, safety and practicality. But he also likes a fair price.  Email Kelsey

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