Do I Need a Special Type of Car Insurance to Drive an Uber or Lyft?

Becoming a driver for Uber or Lyft offers a world of benefits for your work schedule. You can choose your own hours, work from the comfort of your vehicle, and get to know people in your area as you transport them from place to place. It’s no wonder so many people are becoming Uber and Lyft drivers in 2022.

However, before you hit the road and begin tracking miles for your rideshare service, you’ll want to make sure your car insurance coverage is sufficient. Most personal auto insurance policies do not extend coverage to business activities. And without the proper insurance, you won’t be able to receive adequate compensation if you experience an accident while working.

Read on to learn everything you need to know about car insurance to drive an Uber or Lyft. Then contact Encore Insurance to update your auto insurance policy.

What Type of Insurance Do Rideshare Drivers Need?

Most personal auto insurance policies only offer coverage for accidents and damages you experience while driving your vehicle for personal reasons. As a result, if you get into an accident en route to drop off or pick up a passenger, your insurer may refuse to pay for your claim.

Instead, you’ll need to add a specific auto insurance policy covering business activities. However, every insurance company handles rideshare insurance a little bit differently.

Some companies offer rideshare insurance as an add-on to personal insurance policies. Others require you to purchase a new business policy that extends coverage to business activities. And some companies even include rideshare activities in all of their personal policies.

The most critical step in securing the right coverage for your rideshare activities is talking to your insurance company. Your insurer will be able to help you understand what your insurance policy covers and walk you through the types of coverage you can receive under a new policy.

Does Every Rideshare Driver Need Rideshare Insurance Coverage?

Most drivers for Uber or Lyft need specific rideshare or business auto insurance. However, here are a few cases in which you may not need to alter your auto insurance policy:

• You use a vehicle your company owns: If you work for a taxi service or another rideshare company that supplies cars to its drivers, your company probably has a commercial liability policy. As such, you may not need to adjust your own insurance policy.
• Your personal policy covers you: Again, some personal auto policies include built-in coverage for rideshare drivers. If this is the case for you, you may not need to update your policy.
• You complete your rideshare job less than three times per month: Some insurance companies do not require you to update your coverage if you use your vehicle for business reasons fewer than three times per month.
• Your rideshare company offers coverage: Some transportation network companies have begun updating their policies to include insurance coverage for their independent drivers. However, many of these policies only cover you while driving — not when waiting to pick up a passenger.

Even if one of the above situations applies to you, it’s best to talk to your insurance company to determine whether you need rideshare coverage or not. Attempting to determine this on your own could lead you to have insufficient coverage for your needs.

Why Do Rideshare Drivers Need Specific Insurance?

You may be wondering: why do you need to change your insurance policy when you begin driving for Uber or Lyft? After all, you’ll be using your own car and following the same safety protocols as before.

The short answer is that driving for a rideshare service increases your risk of needing to file a claim with your insurer. As a result, you’ll need to adjust your coverage — and pay a slightly higher premium — to gain access to the funds you need if an accident occurs.

Driving for Uber or Lyft increases your claim risk for a few reasons:

• More time on the road: As a rideshare driver, you’ll probably spend more time on the road than usual. The more time you spend driving each day, the higher your risk of an accident.
• More distractions: Working for Uber or Lyft often involves multitasking while driving — viewing directions on your phone, talking to your passenger, trying to find an address, and reading incoming ride request notifications. The more distracted you are on the road, the higher your risk of an accident.
• More liability: Driving for a rideshare service increases the amount of time you’ll have a passenger in your vehicle. If you were to be involved in a severe accident, your insurance policy would need to cover injuries for all passengers.

What If I Don’t Tell My Insurance Company About My Rideshare Driving?

You may be tempted to simply not tell your insurance company that you’ve begun driving for Uber or Lyft. How would your insurer know that you were driving a passenger when you got into an accident?

However, as an insurance customer, it is your responsibility to update your insurer every time your vehicle or driving habits change. This includes when you begin using your vehicle for business purposes.

If you were to experience an accident while driving a rideshare customer and you had not updated your insurance policy, your insurer may refuse to pay for your claim. However, even if you never get into an accident while driving for Uber or Lyft, if your insurance company finds out about your activities, it could cancel or non-renew your policy.

What If My Insurance Company Doesn’t Offer Rideshare Insurance?

Rideshare insurance policies typically vary by state, and some insurance companies do not offer coverage for rideshare drivers at all. If this is the case for you, you’ll need to switch your policy to a different insurer. Thankfully, at Encore Insurance, we make it easy to switch to a new insurance provider.

Contact our Encore Insurance team today at 248-466-0200 to request your free quote. We’ll walk you through the steps of starting a new insurance policy that includes full coverage car insurance to drive an Uber or Lyft.