What Uber and Lyft Drivers Need to Know About Car Insurance

Find out what the requirements are for a Uber or Lyft driver and whether you should drive for them.

Uber and Lyft are popular car hire services. But how does automobile insurance work in a claim against an Uber or Lyft driver? Who has the insurance -- the driver or the company? Who would the injured person make a claim against? Read on to get the answers.

What are Uber and Lyft?

Uber and Lyft are two new car services that compete with taxis and also with existing car services. They are similar to many taxi services in that these companies do not own, operate, or control their cars, and do not hire their drivers directly. The major differences between Uber and Lyft and taxis and traditional car services are their pricing structures and how customers arrange rides with Uber and Lyft drivers.

Unlike taxis, a prospective passenger does not hail an Uber or Lyft driver on the street. Instead, a passenger must download the Uber or Lyft app to their smartphone and arrange for a driver to pick them up through the app. Pricing for an Uber or Lyft ride varies. Some rides can be cheaper than a standard taxi, and other rides can be more expensive than a standard taxi. Uber is known for its so-called “surge” pricing, meaning that its prices vary with demand. At peak times, an Uber ride can be far more expensive than at an off-peak time. Lyft is known for its quirky pricing system - passengers do not technically pay for their ride. Instead, Lyft drivers theoretically receive “donations” from their passengers.

How Does Car Insurance Work for Uber And Lyft Drivers?

Uber and Lyft require all of their drivers to have car insurance. Further, Uber and Lyft do provide some additional coverage for their drivers as supplemental insurance to the drivers’ personal insurance policies.

However, Uber and Lyft drivers must be aware that Uber and Lyft are still very new services and their policies and procedures are evolving. For example, Uber and Lyft have just recently changed their corporate insurance provisions. If you are an Uber or Lyft driver, you should check with Uber and Lyft to determine exactly what type of insurance coverage Uber and Lyft currently provide.

Learn more about Car Insurance Coverage Options.

An Uber or Lyft Driver’s Personal Car Insurance May Not Cover Them

Uber and Lyft drivers should be aware that their personal insurance may not necessarily provide coverage for them while they are driving for Uber and Lyft. This is because many private car insurance policies specifically disclaim coverage for accidents that occurred while the driver was driving for pay. Every standard automobile insurance policy has a list of exclusions from coverage, and one of the exclusions in many states is driving for hire.

If the policy does not cover or specifically excludes driving for hire, then the driver will have no personal car insurance if he/she gets into an accident while driving for Uber or Lyft. The driver will need to purchase supplemental commercial driver’s insurance for an extra cost.

If you are an Uber or Lyft driver, you should check your personal car insurance policy to see whether it covers driving for hire (i.e., commercial driving). But because reading and understanding insurance policies can be tricky, you should also check with your insurance agent and have him/her confirm whether you need extra insurance coverage to be fully protected while driving for Uber or Lyft. Take these into consideration when deciding whether you should, or can, drive for Uber or Lyft.

Uber and Lyft Drivers May Also Need Commercial Drivers' Licenses

Uber and Lyft drivers are driving professionally, meaning they drive for money, whenever they are picking up passengers. Even though they are independent contractors, and not employed by Uber or Lyft, the drivers are certainly driving on behalf of Uber and Lyft. This means that their state might consider them to be commercial drivers.

While every state’s laws are different, Uber and Lyft drivers should be aware that their state might require them to have a commercial driver’s license. For example, some states might only require drivers to have a commercial driver’s license if their full time occupation is driving. So, if an Uber or Lyft driver only drives 10 hours per week, that driver might not need a commercial driver’s license. Check with your state’s department of motor vehicles to see what your state’s requirements are with respect to commercial driving.

If your state requires you to have a commercial driver’s license because you are driving for Uber or Lyft, and you do not have a commercial driver’s license, you could be subject to prosecution if you get into an accident. Further, your automobile insurer might try to disclaim coverage if you get into an accident, even if you have a commercial driver’s policy. Learn more about What to Do If Your Car Accident Insurance Claim is Denied.

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