What Kind of Insurance Do Ridesharing (Uber & Lyft) Drivers Need?

Anita is a ridesharing driver for one of the popular ridesharing services (also called a Transportation Network Company, or TNC). She only drives in Nassau County, outside New York City, and she’s taking a passenger to a restaurant. On the way, Anita has a fairly major car accident. Anita, her passenger, and the other driver are all hurt. No one is seriously hurt, but there are hospital visits, overnight stays, and tests to run.

Unfortunately, Anita was only using her personal auto insurance as a driver, which has a $25,000/$50,000 limit. $25,000 gets paid for each person’s injury, and $50,000 gets paid the total accident.

There were three people involved in the accident, and everyone’s bills came to $30,000 per person, or $90,000 total. Anita’s insurance will cover up to $50,000 of the total bill, but she’s on the hook for the remaining $40,000.

If she’d had ridesharing/Uber insurance with the right limits, she would have been properly covered and wouldn’t be in danger of losing her house and car.

This assumes the insurance company won’t refuse to pay since she had an accident during a commercial venture and only had personal insurance. Insurance companies are cracking down on ridesharing drivers who use personal auto insurance. Here’s why.

What is Ridesharing/Uber Insurance?

Basically, ridesharing insurance is a type of commercial auto insurance. Delivery truck drivers, contractors, and even taxi and limousine drivers must carry commercial auto insurance. In some states, it can be an extension of your personal auto insurance, but that varies from state to state.

Commercial automobile insurance is just like personal automobile insurance, but for any vehicle owned by a business. Whether your salespeople drive a car or your construction company owns a dump truck, any vehicle used for business purposes must have commercial auto insurance.

Even if you drive your personal car for business purposes, you need commercial insurance.

Who Needs Lyft and Uber Insurance?

If you drive a ridesharing car for business purposes, you need ridesharing insurance. Taxi drivers and limousine drivers have it. Since ridesharing drivers perform the same function, they need the same insurance.

Of course, your area of operation will affect what kind of ridesharing insurance you have and how much you need. If you drive inside New York City, you need the same insurance taxi and limousine drivers have with the same minimums. If you drive outside of New York City, you can get away with not having it, but you’re not allowed to operate within the city.

Also, if you’re driving on your personal auto insurance, and your insurance company finds out, they could drop you completely, and then you won’t have any auto insurance at all.

What Does Ridesharing Insurance Cover?

Uber, Lyft, Juno, Via, and other ridesharing services have been a major disruption in the transportation industry. Many cities have looked for new ways to cope with a service that was hurting taxi and limousine drivers.

As a result, there are new kinds of regulations for ridesharing drivers that affect their industry. One of these regulations concerns their insurance and what they’re required to carry.

To begin with, in New York City, the Taxi & Limousine Commission (TLC) mandates what ridesharing drivers must have to drive in the city. For one thing, they must have TLC license plates and a TLC license (hack license). It’s not enough to just have a regular state driver’s license, you have to have the right kind of driver’s license.

Once you have that hack license, you’re able to register and get the TLC license plates. One requirement for having TLC plates is that you carry full commercial auto liability insurance at full $100,000/$300,000/$100,000 limits. ($100,000 is paid out per person for bodily injury, $300,000 is the maximum paid per accident; the other $100,000 is for property damage.)

What Does Ridesharing/Uber Insurance Not Cover?

Ridesharing insurance will vary from company to company. But as long as you drive for a ridesharing company, and are actually available or carrying passengers, your ridesharing coverage is in effect. If you’ve turned on your availability on your ridesharing app, you’re covered. Even if you’re not carrying anyone.

But if you turn off your availability, then you’re no longer covered. This means you’re only covered by your regular auto insurance during those times.

Are There Limitations to the Scope of Ridesharing Insurance?

While there are no limitations to the scope of ridesharing/Uber insurance, there are limitations to where you’re allowed to operate without it. There are also limitations to the kind you must have if you want to drive in New York City.

For example, the TLC requires all taxi/limousine/ridesharing drivers to have $100,000/$300,000 coverage on their insurance.

The Big Takeaway

Ride sharing is a relatively new phenomenon, and it has made significant disruptions in the taxi and limousine industry. It has also caused the insurance industry to make adjustments as well. The rules and requirements vary from state to state and even in the cities within that state.

In New York City, ridesharing drivers often treat their driving like the owners of town cars and limousines. They make sure they’re driving newer cars and have bottled water in the back seat — it’s a premium experience. But in smaller cities around the country, you could ride around in someone’s 2010 Toyota Corolla. It’s a side hustle in other cities, but in New York City, it’s a full-time job for other drivers.

So just because a friend from another state convinces you to start driving for Lyft or Uber, that doesn’t mean you can just jump into it. You have to know what you’re doing before you just start driving. You need to call an insurance professional to make sure you have the right kind of insurance so you don’t get dropped.

Conclusion

Ride sharing is a business, and it requires business insurance, or at least an extension on your personal insurance. But instead of trying to figure out what you need or don’t need, talk to a professional insurance agent licensed in the city where you want to drive. They’ll help you figure out the coverage you need so you’re fully covered against every possibility.