Get the Insurance Facts on Ridesharing Companies Such as Lyft and Uber


Learn about Insurance Facts on ridesharing companies such as Lyft and Uber 

The news is full of headlines, both positive and negative, about ridesharing companies. The companies, while they are extremely useful, have had a number of safety issues and concerns crop up in recent months. One of the biggest concerns is in regards to insurance for the drivers and who actually provides coverage at different points. 

Why Is Ridesharing Popular? 

While ride-sharing is still technically quite new, it has become popular among customers as well as those who drive for the companies for a number of different reasons. 

  • • At times, it is cheaper than hiring a traditional cab


  • • Easy to use a phone app to connect with drivers and customers


  • • Drivers can make a good primary or secondary income


More and more people are starting to use their vehicles and the phone apps provided by companies such as Lyft, Uber, and Sidecar to connect with customers and start earning. However, this is not sitting well with a number of insurance companies. 

Why are some insurance companies upset with ridesharing? 

The companies claim that personal car insurance is for the private use of a car and not for providing rides to strangers for pay. The main problem that the companies have with this is the period of time when the driver is on duty, the app is on, but they have not yet made an agreement to pick up a client or customer. This is the questionable zone, as it is before the ride-sharing company’s insurance takes over, and it leaves the private insurance company to take up the slack. 

Many of the drivers and ridesharing companies believe that simply having personal car insurance is enough to provide coverage. It’s the actual activities in which they are engaging when they work for one of these companies that cause concern with the insurance companies. 

Most of the ridesharing companies do not require that their drivers have commercial licenses. However, with Uber, those who are driving for Uber Black, Uber SUV, and Uber Taxi do need to have commercial licenses and commercial insurance. The only Uber drivers that this particular insurance problem actually affects are those who are UberX drivers. They only have the coverage from Uber once they’ve actually committed to picking someone up, not while they are still looking for customers. This is actually how it is for most of the ride-sharing companies. 

Different states around the country are now trying to figure out just what they need to do about this issue. Some insurance companies are now including language in their policies that prohibit working for a ride-sharing company. For the driver, this would mean that if they were to work for a company such as Lyft, and were to get into an accident before the company’s commercial coverage kicks in at the time of accepting a customer, the private insurance company will not have to pay. 

How are the ridesharing companies, insurance companies, and states reacting? 

Many of the companies are making changes to their own rules and policies, and they are taking on more responsibility when it comes to providing coverage for their drivers. As mentioned, two of the most popular companies, Lyft and Uber, offer third party liability insurance to the tune of $1 million after a driver accepts a ride until the passenger gets out of the car. This still doesn’t solve the drivers’ problem who are out on the streets and looking for drivers. 

Right now, it really is up in the air when it comes to what will happen, as the states are still trying to figure out what type of insurance the companies need to provide for their drivers.  One state has already made a decision though. California now makes it mandatory for these companies to provide insurance for their drivers as soon as they open up and turn on their application. This stems from a tragic accident that happened on New Year’s Eve in San Francisco in 2013. A driver for Uber killed a 6-year-old girl who was crossing the street while he was looking through his phone for customers. 

It is still unclear what other states will do in reaction to the popularity of ride sharing. It may be advantageous for insurance companies to look at ways of bridging the gap for drivers of these ride sharing companies. While this is still new territory, creating an insurance product that meets this particular need and that’s something between a traditional policy and a commercial policy could be a way to keep clients. 

Those who are running ridesharing companies, as well as the drivers, should make it a point to find ways to work these matters out with insurance companies. Some drivers now are hiding the fact that they are drivers for these ridesharing companies, and this could come back to bite them in the end. Take the time to learn more and become part of the solution rather than a part of the problem. Get in touch with us today for more information. 

If you have questions about your insurance coverage, contact an Avante insurance specialist today for a complimentary evaluation.  At Avante, we’re always standing by.