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Lyft Insurance Explained

By Posted : July 12, 2018

Ridesharing and insurance

According to insurers there are three "periods" when it comes to ridesharing.

  • Period 1: You are cruising around with the Lyft app open but haven't been matched with a rider.
  • Period 2: Lyft has matched you with a rider and you are en route to pick them up.
  • Period 3: Rider is in the car. Period 3 ends when you drop them at their destination.

If you have an accident, proof of coverage from your personal policy should be adequate.

The truth is, the more time you spend on the road, the more likely you are to have an accident, and when that happens you will want to know which (if any) insurance company is going to pick up the tab.

What Lyft's insurance covers

Lyft carries liability coverage for its drivers, but the coverage levels depend on whether there is a passenger in the car. Collision and comprehension only available only to drivers who already have these coverages on their own policies, and your injuries are only covered if the other driver is at fault.

Here is a quick look at what Lyft insurance covers:

Period 1: Liability limits are low and comprehensive and collision coverage are not offered.

  • Liability: Lyft's liability coverage has limits of 50/100/25 ($50,000 per person bodily injury, up to $100,000 per incident, and $25,000 for property damage). This is contingent coverage in every state except California and Maine. Contingent means you have to make a claim on your personal policy first. If the claim is denied, Lyft's coverage will step up to the plate.
  • Collision and comprehensive: Lyft does not offer any collision or comprehensive during Period 1. Unless you are carrying this coverage on your personal policy, you will be responsible for the cost of repairing your vehicle. (Even if you have comp and collision, your insurer may not honor the claim unless you have a rideshare endorsement on your policy.)
  • Uninsured/underinsured motorist: Lyft does not offer this coverage during Period 1. If you are injured by another driver who is uninsured, you will need your own uninsured motorist policy or a health care coverage to cover the cost of your injuries.

California and Maine have different laws for Period 1. In these two states personal insurance policies do not apply at all during period 1. This means that Lyft drivers must carry a commercial livery policy or a policy with a rideshare endorsement. If the driver has neither, Lyft's contingent liability will have to step up, but again, the limits are low.

Periods 2 and 3: Liability is coverage is plentiful, but collision and comprehensive is only contingent.

  • Liability: Lyft (just like Uber) carries a $1 million liability policy. This should be plenty of coverage in most cases.
  • Collision and comprehensive: Lyft offers comprehensive and collision to its drivers during Periods 2 and 3, but the coverage is contingent. You will need to make a claim on your personal collision and comprehensive policy (assuming you have one) and if your insurer denies the claim, Lyft's insurance will ride to the rescue. Lyft's policy has a wallet-busting $2,500 deductible, which you will have to pay.
  • Uninsured/underinsured motorist: Lyft carries a $1 million policy, which should be sufficient.

While Lyft will overlook small dings and scratches, if you have a huge dent, you will not be cleared to drive until the vehicle is repaired.

What insurance do I need?

Carry these three types of insurance on your personal policy, as well as a rideshare endorsement, if you decide to drive for Lyft or any other ridesharing company. There are also a couple other coverages that you should consider.

Liability: Every state in the country requires drivers to carry liability insurance. Required coverage levels vary. Liability covers injuries to another person or damage to their property due to an accident caused by you. Liability does not protect your own car or cover any of your medical costs. Most experts recommend carrying 100/300/50 – that’s $100,000 per person for injuries, up to $300,000 per accident, and $50,000 for property damage. Additional liability coverage is usually pretty affordable.

Collision/comprehensive: State law never requires collision and comprehensive, but if you have a loan on your vehicle, the lender will require these coverages. Collision pays to repair or replace your vehicle if it is damaged in an accident with another vehicle or stationary object, even if you are at fault. Comprehensive covers theft and damage from hail, fire, vandalism or collision with an animal. Unless you can easily afford another car, you should never be out on the road without collision and comprehensive. Remember, if you have to use Lyft's coverage, its deductible is $2,500. By far the most common deductible chosen for personal car insurance is $500.

Uninsured/underinsured motorist: This coverage is not required by all states, but it is by some. Basically this coverage will help cover injury-related medical expenses if you are in an accident and the other driver is at fault but they don't have insurance. It also protects any passengers in the car at the time of the accident. Uninsured/underinsured can also help with lost wages and pain and suffering. If the driver who hit you has coverage but with low limits, the underinsured policy will cover the difference.

You should also consider:

Gap coverage: Driving strangers around will rack up the miles on your car, which leads to deprecation. If the car is totaled your insurer will only pay the actual cash value of your car, not what you still owe on it. Gap insurance covers the difference.

Medical payments: This insurance covers the cost of medical expenses due to a car accident. It will even cover the deductible on your health insurance. If you do not have a health insurance policy, you should absolutely consider a medical payments policy.

Tips to ensure sufficient coverage 

Unfortunately, not all ridesharing drivers are buying the insurance they need. According to the 2018 survey of 1,200 drivers by The Rideshare Guy Harry Campbell:

  • 46.5 percent of respondents said they have purchased rideshare insurance
  • 46.8 said they have not
  • The rest declined to comment which more than likely means they are not carrying a rideshare policy.

Why risk hitting the road without coverage? While the availability of rideshare insurance as well as the cost can be factors, Campbell speculates that drivers are simply unaware of the need, "I think the biggest reason is that drivers are just unaware they need special rideshare coverage to drive. Many simply do not know that rideshare driving is typically not covered by personal insurance companies or that Uber and Lyft's policies are not adequate."

The data also showed that 55 percent have notified their personal insurance company that they are a rideshare driver while 28 percent have kept their insurer in the dark and 9.7 declined to answer.

Luckily, only 17.3 percent of respondents have had to make a claim on their insurance while working for a rideshare service.

Penny Gusner, consumer analyst for Insurance.com, says you should:

  • Review your personal policy, as well as what's offered by the ridesharing company, and be sure there are no coverage gaps, especially during the waiting period for a request.
  • If a rideshare endorsement is not offered in your state, bit the bullet and buy a commercial policy.
  • Always notify your insurance company when you start driving for a ridesharing company, even if your ridesharing insurance provides coverag for all driving periods during the job, otherwise your insurer is likely to cancel your policy.
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