Curious how rideshare insurance works? Senior RSG contributor Christian Perea broke down how rideshare insurance works for Uber and Lyft drivers, period by period. For instance, did you know in period 1 (you’re online with Uber or Lyft but haven’t accepted a passenger request yet) that there are major gaps in coverage? Take a look at the infographic below and let us know what you think in the comments!

Find out what insurance options are available in your state here. 

How Does Insurance for Uber/Lyft Work?

You may think that Uber and Lyft cover you the whole time you have your app “on” and are driving for rideshare, and you would be right – somewhat. Unfortunately, rideshare insurance can be a little confusing. Let’s break down the infographic above.

Rideshare driving is divided into three periods: period one is when you’re online waiting for requests, period two is when you’ve accepted a request and are en route to pick up the passenger, and period three is when you’ve acquired the passenger and are driving to their destination.

During period one, you won’t receive any collision coverage – and the liability limits are much lower than normal. One nasty accident could quickly exceed them, putting you on the hook for many months’ worth of earnings.  During periods two and three, Uber and Lyft provide commercial insurance with $1 million in liability but $1,000 deductible on Uber and $2,500 deductible on Lyft.

Another issue is that personal insurers reserve the right to nullify your coverage entirely if you violate their terms and using your vehicle for commercial purposes (such as Uber, Lyft, or food delivery) is one such violation. If (or when) your personal insurer finds out you’re a rideshare driver, they might drop you from your policy and/or deny coverage.

See more reasons to get rideshare coverage here.

How does a rideshare insurance policy work?

There are two main types of rideshare insurance: Gap coverage and extended coverage. Both types protect you from financial disaster by modifying the “commercial activity” clause in your contract so that you can drive for Uber and Lyft without the risk of getting dropped from the policy. Gap coverage  extends your personal policy to include period one, ensuring that you’ll be adequately covered no matter when an accident occurs. During periods two and three, you’ll still rely on James River – Uber’s insurance provider.

How you can avoid high insurance deductibles here.

Some gap insurers, like Allstate, have additional perks like deductible reimbursement. Uber’s deductible during periods two and three is $1,000, and Lyft’s is even higher at $2,500. If you’re ever on the hook for that amount, Allstate will reimburse you so that the deductible you pay to James Rivers matches the deductible on your own policy.

Other companies offering gap coverage include Farmers, Mercury, and USAA.

Extended coverage takes it a step further by expanding your coverage (deductible and all) to include all three periods. The most important benefit is that you won’t have to deal with James River. They’re not known for having good (or even adequate) customer service, and getting a claim paid out can take months – which can be downright devastating if you drive full-time. Extended coverage from a company like GEICO ensures that you won’t be in for any unpleasant surprises. More companies offering extended coverage include State Farm and Metlife. Others, like SafeCo, offer a sort of hybrid of the two types, depending on the details of your particular policy.

Find out what insurance options are available in your state here. 

Can’t I just keep my regular personal insurer?

Lying to your insurer isn’t just grounds for getting dropped from your policy – it’s also a crime. If you do get dropped from your policy, it may be hard to find a company willing to insure you again. Of course, if you’re already on the hook for damages (and without your car to boot), finding new insurance will be the least of your worries. Suffice to say that flying under the radar is a big risk.

However, you can find a lot of good rideshare insurance options by state here.

What if my car is a Lyft/Uber rental?

For Lyft and Uber rentals through Hertz, GM, and Enterprise, the issue is a bit more complicated. Included with the rental price, you’ll receive some level of insurance – and of course while you’re ridesharing, you’ll be under the usual policy. But when you’re not driving for Uber or Lyft, they may not provide collision insurance.

Most concerning is that the insurance provided by the rental company sets your liability limit at the state minimum – which in some cases is $0. If you’re putting personal miles on your Uber or Lyft rental, it’s a good idea to protect yourself financially with additional liability and collision coverage – State Farm in particular offers policies geared towards this situation.

What if I Don’t Drive that Often?

A pay-as-you-go rideshare insurance plan might be for you! Check out that option with OptOn here.

Do you have more questions about rideshare insurance? We have answers! Check out our Rideshare Insurance FAQ here.

Do you have additional comments or questions on rideshare insurance? Let us know below!

-Christian @ RSG