A lot of RSG readers have questions about insurance deductibles, including what are they? How much do I have to pay? When do I pay it? Insurance is never clear, so RSG contributor Gabe Ets-Hokin wades into the swamp to try and pull out some answers.
It’s a sickening sound, and if you haven’t heard it already, you’re going to hear it someday. It’s the sound of your car physically interacting with something in a dramatically personal and destructive manner. The odds of you making it through your entire rideshare-driving career without hearing it are slender.
Luckily, you’ve got insurance specifically designed for rideshare drivers (you do have insurance specifically designed for rideshare drivers, right? If not, get it now) and it covers you in instances such as this.
What’s a Deductible and Why Do They Charge it?
Your deductible is the out-of-pocket portion of damages paid by you, the policy holder. What? It’s insurance! Why should you have to pay for any of it? The reason insurance companies charge a deductible is to discourage very small claims that would drive up administrative expenses. In exchange for having to pay a deductible in the event of a mishap, the policy holder gets a reduced premium (the amount you pay to get the coverage) depending on how large that deductible is. In most cases, consumers pay something like $250-1000 dollars.
Your deductible might be different depending on the type of claim and who is at fault. Most policies have a different deductible for comprehensive claims (bad thing that happens that doesn’t involve another vehicle, like theft or vandalism) or collision claims (bad things that happen when you hit another vehicle), and you can select higher or lower deductible amounts, or even, if you’re a big shot, no deductible at all. Remember all those questions you answered when you purchased your policy? Don’t despair: if you want a different amount, you can usually adjust it online.
Rideshare Deductible: Period 1
Uber and Lyft provide insurance during Periods 1-3 but the deductible varies depending on what’s going on in your Uber, Lyft or other gig-work app. Period 1 is when your driver app is online and seeking trips. This is also the dreaded “donut hole” or “dead period” that got a lot of drivers in trouble in the early days of rideshare. That’s because Uber and Lyft cover you for comprehensive, collision and liability in Periods 2 and 3 (see below), but only cover minimal liability in 1. So there’s no collision coverage in period 1 and thus no rideshare deductible.
For comp and collision, Period 1 is covered by your personal insurance, and since most policies don’t cover commercial use (no, you are not a “friend with a car,” no matter what Lyft’s marketing used to say), you need a “rider,” specific language in your policy that says it’s okay and you’re covered during this period.
If you are covered, and you get in an accident, maybe running a light chasing a Lyft PPZ or just driving to work enjoying the mileage write-off you get while on the destination filter, your regular policy – and deductible – will apply. How does that work? You file your claim, and the insurance company will pay it less the deductible amount, either directly to you or to a repair shop or maybe the car’s lienholder if it gets totaled. You’ll pay the deductible to that third party directly, which stinks, but hey, a high-deductible policy can pay for itself if you’re accident free for a year or two.
Deductible: Periods 2 and 3
For insurance-deductible purposes, Periods 2 and 3 are pretty much the same, with a few exceptions. That’s because Uber and Lyft’s insurance cover you during these periods, less their deductibles. Also, the Uber/Lyft insurance covers liability to all drivers regardless of their personal coverage, but only covers comprehensive and collision coverage if you have it on your personal policy. That means if you have liability only, or self-insure (some states allow you to post a bond in lieu of having insurance), you won’t be covered for losses resulting from your own negligence.
Uber offers a better – much better – deductible than Lyft at $1,000. That means regardless of how much mayhem and chaos, the driver will only be responsible for $1,000, at least up to the $1,000,000 of total coverage its insurance will pay out per incident.
Lyft? Not so good. You’ll pay $2,500 per occurrence, and then Lyft will step in for the next $997,500. Why does Lyft want a higher deductible? Who knows is the answer, but it’s been that way since the early days. All you can do is what Harry said to do back in 2014: keep $2,500 handy to pay your deductible if something happens.
Some Good News…
Here’s a bit of good news, though: depending on where you live and your insurance company, your rideshare insurance policy may cover you in Periods 2 and 3 as well as Period 1, which means you may have a lower deductible during these periods. And not only will it cover you, you may even pay less than your regular policy…or even get paid a bit extra per ride! For real!
For instance, as Jonathan Knope reported, State Farm’s rideshare coverage essentially extends your personal policy’s comprehensive, collision and other limits to Periods 2 and 3 (except for liability), which means you can enjoy a much lower deductible than Uber of Lyft offer.
Geico also offers this type of policy, and since Geico partners with Lyft, not only does it offer extremely competitive rates (at least for one driver, RSG contributor Jay Cradeur), Lyft will actually rebate you 25 cents per ride if you carry the Geico (or any) policy so long as you identify Lyft as an “interest” on your policy.
This means your insurance company will “share certain policy information with Lyft (including start date, coverage, name, contact info, and details of the car you use for driving on the Lyft platform),” according to Lyft’s website. This can be as much as $500 every 6 months, which can seriously discount your operating expenses…if you’re okay with Lyft getting all up in yo’ insurance business.
Allstate has an interesting approach to rideshare insurance as well. It won’t extend your coverage to Periods 2 or 3, but it will reimburse you for the difference between Uber or Lyft’s deductible and your personal policy’s. That means if your deductible is normally $500, and you have to pay out $2,500 to collect on a Period 2 or 3 claim, Allstate will cut you a check for $2,000 after you show proof you paid for the repairs. We also found it’s significantly cheaper in some cases; just an extra $10 or $20 a month.
Check out our comprehensive guide to rideshare insurance offers here.
Do I Pay if I’m Not at Fault?
A year ago, RSG reader pinkdesire asked if he or she was responsible for paying a deductible if he or she wasn’t at fault. The answer is: it depends on who’s paying. If the at-fault driver didn’t have insurance, then Lyft or Uber will cover the claim and yes, you will pay the deductible. However, if the at-fault driver is covered, their insurer will cover the claim up to the limits of their insurance; no deductible…unless they are just carrying the minimum required by state law and it doesn’t cover your losses.
In that case, Uber or Lyft will step in and handle the uninsured amount as an uninsured loss. Less, of course, your deductible.
Conclusion: You Need Rideshare Insurance
Having an accident while driving is an awful experience, and it can be made worse by the impersonal and unilateral way Uber and Lyft treat their drivers. You will likely be deactivated while the company investigates, and it could be weeks before you get your car repaired or replaced.
You can prepare for this by first carefully reading your policy and finding out what your deductible will be (and maybe adjusting your policy to get the smallest deductible you can afford) and then making sure you have an emergency fund to cover your deductible and maybe the cost of renting a replacement vehicle through Fair, Maven or one of the other services we’ve reviewed. Get a dashcam to protect your rights and drive carefully and defensively; you may save a bit of time speeding and bending traffic laws, but think how much time you’ll lose with even the most minor of accidents.
Drivers, do you have rideshare insurance? Have you ever been in an accident while driving for Uber or Lyft?
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-Gabe @ RSG