How Rideshare Insurance Works
Those who jump into the world of rideshare driving often assume that as long as you have a vehicle, you can start offering rides. Unfortunately, this can lead to an abundance of issues for new drivers, especially when it comes to insurance.
A personal auto insurance policy will keep you protected when you’re not driving for a TNC (transportation network company) like Lyft or Uber, but it won’t help much in other situations. To help determine when rideshare insurance takes effect, insurance companies break down levels of coverage into periods. Each period requires a different level of insurance coverage.
To help drivers maintain coverage, many ridesharing companies will offer some level of insurance when transporting passengers. Often, the company-provided insurance covers the following areas:
Even though the insurance offered by companies such as Lyft and Uber may seem comprehensive, it often only applies in situations when drivers have a passenger. In other moments, such as when you are waiting to pick up a customer or driving to a pickup zone, you are often not covered by the company or by your personal car insurance.
Rideshare insurance plans help fill these coverage gaps and keep drivers protected at all times while on the road. Below is a breakdown of the different periods you will experience as a rideshare driver and which insurance is likely to cover you if an accident occurs.
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Period 0 – Driving While Offline
Even though it might be fun to work as a rideshare driver, we all need time to ourselves as well. When you are not actively working and using the rideshare app, the commercial insurance provided by Lyft and Uber will not be active. Instead, when you are using your vehicle for personal use, you will be covered by your general auto insurance policy.
Period 1 – Awaiting a Pickup Request from a Passenger
The first gap in your auto insurance occurs when you are actively on the app but haven’t yet received a request from a passenger. During this period, since you are technically working, your personal auto insurance policy won’t provide coverage. Also, most TNC commercial policies won’t offer protection when a passenger isn’t in your vehicle.
Since neither your personal auto insurance nor the company-provided insurance will likely cover you if you are involved in an accident while awaiting a pickup request, you will want to have an added layer of protection. This is where rideshare insurance comes in handy. A rideshare policy will help offset the financial burden that would be brought on by an accident occurring during this period.
Period 2 – Driving to a Passenger Pickup Location
Once you accept a ride request from a passenger and begin your journey to pick them up, your company-provided insurance kicks in. While the coverage does offer some protection, the insurance often has a low maximum coverage amount. Depending on how severe the accident is, you may still be financially responsible and have to pay some damages out of pocket.
One way to ensure you have the proper amount of coverage is by adding another layer of coverage. Rideshare insurance is typically available as an add-on and works well to cover any gaps left by a company-provided plan.
Period 3 – Actively Transporting a Passenger to a Drop-off Location
Period 3 is similar to period 2 in that your TNC coverage, like Lyft or Uber insurance, will likely offer some coverage and be in effect. Rideshare insurance will also extend coverage during this period for any additional costs not covered by the commercial plan. One important thing to keep in mind is that once you drop off your passenger, you are moved back to period 1 again.