What You Need to Know About Lyft Insurance Policies

08/20/2019
By Logan Quirk

It’s common for drivers to take comfort in knowing they have auto insurance without really understanding the details of their policy. But overlooking the details of how Lyft insurance works is a big mistake if you’re a Lyft driver. Below is a list of basics that you need to read and understand before you ever pick up your first Lyft ride.

Minimum Insurance Requirements for Lyft Drivers

Lyft requires every new driver to meet several requirements, starting with the minimum auto insurance as required by the state where they will be driving.  Every driver on the roads must have the minimum required coverage in case they are liable for a wreck. If they are liable, personal auto insurance covers the cost of repairs and medical bills.

Without personal auto insurance, an at-fault driver can occur the financial risk of paying for property damage and medical treatment out of pocket. While Lyft requires new applicants to submit proof of insurance, this coverage doesn’t protect them or their passengers while they are providing rides to Lyft passengers.

“Personal” insurance is just that; personal. It protects drivers on their way to work, dropping their kids off at school, or when they’re going out of town on vacation. The insurance company considers several factors when calculating any person’s premiums. They consider things like their previous driving record, their age, and how much time they spend on the road. They assign a premium amount according to the driver’s potential risk of having a wreck. When the same person is driving for a rideshare company, the insurance company looks at the situation differently.

Although the debate over whether rideshare drivers are employees or freelance workers continues, one thing is clear: Lyft drivers are using their vehicles to make a profit. They spend more time on the road and increase their risk of having a wreck. They also carry passengers, increasing their risk of liability. That increases the risk that they will be liable for another person’s injuries and property damage. That could mean more of a payout for the insurance company. Realistically, no insurance company is going to provide the same coverage to a Lyft driver that they do on a personal policy for personal use.

Another problem is that the minimum requirements as listed above aren’t enough to cover multiple claims. For example, if a Lyft driver carrying two passengers is at fault for a wreck involving another vehicle carrying one driver and three passengers, there’s a potential for six separate claims! That’s in addition to the damage to the other vehicle and any other property damaged due to the wreck.

How does that translate in dollar signs? Using California as an example, the state requires drivers to carry a minimum of…

  • $15,000 in bodily injury per person
  • $30,000 in bodily injury per accident
  • $5,000 in property damage liability
  • $15,000 in uninsured motorist bodily injury per person
  • $30,000 per accident minimum

Those numbers might seem large at first glance, but not when you break down what they really mean. If a driver has minimum coverage and causes a wreck like the one listed in the example above, the limits only pay up to $15,000 in bodily injury per person, or $30,000 per accident.

Considering the cost of medical care, even moderate injuries for six people could reach into the millions. But the insurance isn’t going to pay more than $30,000 for all of the injuries caused by the insured driver. The driver is still liable for the total amount of damages, leaving them to pay using other assets and being open to a lawsuit.

So, what does this mean for Lyft drivers? The bottom line is that basic auto insurance coverage is required for Lyft drivers. It doesn’t cover accidents caused while driving for the rideshare company, and minimum coverage might not be enough even when Lyft passengers aren’t involved. That’s where Lyft insurance comes in…at least, to some degree.

what lyft insurance covers

What Lyft Insurance Covers

Lyft provides a $1 million insurance policy to pay for some damage to the driver’s vehicle, liability, and injuries. Like personal auto insurance, it depends on what the driver is doing at the time of the accident whether the insurance “kicks in.”

How Rideshare Works

Most people who have used ridesharing services know how it works. They have to download the Lyft app on their smartphone to request a driver. The app lets the passenger request a certain type of ride, rate their driver, pay them, give a tip, and more.

For the driver, the process starts when they turn the app on to accept rides. Once someone makes a request, they see the request with all the details on their phone. They tap on the screen to accept and then start the trip to their passenger’s pickup point. Once they pick up the passenger, they begin navigating to the requested destination. They tap the phone again when they drop the passenger off.

Depending on the “phase” of a Lyft ride, the Lyft insurance might, or might not, cover the damages if a wreck occurs. The phases, or periods, work as follows:

Phase 0

This is the period when the driver has the app turned off, and they aren’t accepting passenger requests. Since the driver isn’t using the vehicle for commercial purposes, their personal insurance is in effect. Even if the driver is en route to the destination where they provide ridesharing services, they don’t require Lyft insurance when the app is off.

Phase 1

Once the driver arrives at the location where they will accept passengers, they turn the app on. Phase 1 covers the period from when the app is turned on, but the car isn’t in the process of picking up or transporting a passenger.

Phase 1 is often called the “coverage gap” because neither the driver’s personal auto insurance or the Lyft insurance will cover them. From the perspective of the person’s insurance carrier, the vehicle is officially being used as a commercial vehicle. While Lyft insurance does offer some coverage during this phase, it is minimal.

Specifically, what Lyft insurance covers during phase 1 unless state or local laws dictate otherwise is:

– $50,000 maximum per person for a person’s injuries

– $100,000 maximum per accident for all liability expenses  such as property damage resulting from an accident

– $25, 000 maximum for property damage to someone else’s car

This coverage does not require the driver to meet a deductible.

Phase 1 is where the Lyft driver is most vulnerable. Their risk of being in a wreck while sitting in a parking spot waiting on a transportation request is lower; but if they cause any damage or injury to a pedestrian or vehicle, neither insurance company will probably provide adequate coverage. This is especially if serious injuries occur, or if the incident involves an expensive luxury vehicle.

Then there’s the cost of repair to the driver’s vehicle and the driver’s injuries. Lyft insurance is a liability policy. It doesn’t cover injuries or damages the driver incurs. Without compensation, the driver might not be able to repair or replace their vehicle. If their injuries are serious enough, they might prevent them from earning a living from driving and their other job.

Lyft drivers can’t rely on either their personal auto policy or Lyft insurance to cover them during phase 1. They can purchase additional “coverage gap” insurance that is specifically designed for this purpose. Many insurance providers offer this type of insurance for rideshare drivers. In most cases, the cost is far less than the potential liability for having a wreck during the phase 1 period.

Some insurance companies have come a long way with options for protecting rideshare drivers. While the idea was still in its infancy, not only did insurance companies not offer insurance coverage for this specific purpose; most would drop the person’s insurance altogether if they learned how they were using their vehicle.

Today, companies that don’t offer rideshare insurance that they can add to the driver’s policy will still cancel a person’s insurance if they start driving commercially. The good news is that there are a lot of insurance companies out there who provide a range of options that make having the necessary coverage affordable.

Phase 2

During this phase, the driver has accepted the ride and started the trip to pick up the passenger. Lyft insurance coverage increases significantly during this phase. The insurance covers:

– Up to $1 million per accident, including damage to another vehicle and any injuries resulting from the collision.

– The actual cash value or the cost of repairs to the driver’s vehicle, whichever is lowest. There is a $2,500 deductible that the driver must pay first, and the coverage is contingent on their having collision coverage on their personal auto insurance policy.

– The lower value of the actual cash value or the cost of repairs to the driver’s vehicle for damage resulting from non-collision events such as fire, vandalism, or a natural disaster. This coverage is also contingent on the driver having collision coverage on their personal auto policy, and it has a $2,500 deductible.  This coverage applies, even if the driver is at fault.

– Up to $1 million in uninsured/underinsured motorist coverage when the at-fault driver is either uninsured or underinsured. The coverage applies to the driver and any passengers experiencing bodily injury as a result of the other driver’s actions.

Phase 3

Phase 3 begins when the driver picks up the passenger and continues until they drop them off at their destination. The Lyft insurance provides the driver and their passenger with the same coverage as in phase 2 throughout this period.

Lyft Insurance Exceptions

The policy for Lyft insurance applies in nearly every state. One exception is for rides originating in New York City with a Taxi and Limousine Commission (TLC) driver. The rideshare company also explains that some regions have specific requirements that affect the types and amounts of coverage provided.

How Much Insurance Is Enough?

Lyft and other popular rideshare companies have provided people with a flexible way to make a little extra money. Some people have made a career out of driving for these companies while others use their money from making fares to supplement their regular income. All it takes is one accident without adequate insurance coverage to keep them or someone else from being able to support themselves or to pay their bills.

Failing to take the issue of Lyft insurance seriously can have far-reaching consequences. Drivers should never leave the issue of an insurance company to chance. Even though the phase where drivers are most vulnerable doesn’t seem that risky, a single accident can have devastating effects.

If they think the insurance company won’t know, they’re wrong. All it takes is having an accident and filing a claim with Lyft. The rideshare company will then call to verify the driver’s personal car insurance and tip off the insurance company. It’s better to have a solid insurance plan for any phase of the Lyft driving process and know that they are covered from start to finish.

Raising the Limits on Your Car Insurance

Any driver should consider raising their coverage on their personal vehicle. Any time the damages exceed the limits of coverage, the at-fault driver is responsible for the remainder of the settlement amount. Whether it’s their passenger or someone in a second vehicle, it’s the responsibility of the at-fault driver to make the person whole again.

On the other side of the situation, no one should assume that they can’t get the compensation they need and deserve because of the limits of insurance coverage. A personal injury attorney knows how to find undisclosed assets and make the at-fault party pay. Anyone who is injured or suffers damages because of another driver has the right to compensation.

If you’ve been in a Lyft accident, contact Quirk Law Group to learn about your rights. Whether you are a Lyft driver, a passenger, or a third party, we can help you understand more about how Lyft insurance works.

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