How Does Car Insurance Work for Uber Drivers?

With all the talk of Uber recently, you might have considered signing up to drive for the service in order to earn some extra money. You might also wonder about the implications when it comes to your car insurance and who would pay in the event of an accident. Read on to learn all about what steps you may have to take to ensure you don’t run into any insurance surprises.

What is Uber?

Uber is a ride-hailing service (sometimes referred to as “ride-sharing”) that competes with taxis and black car services. Passengers hail an Uber from the smartphone app and arrange for a car to pick them up, often for less than the cost of a traditional taxi.
While Uber has a number of commercially-licensed black car services, it also has a product called UberX. UberX allows local drivers to respond to notifications on the Uber app by driving customers in their own (non-luxury) cars.

From a business perspective, Uber is similar to taxi companies in that they do not own or operate the cars, and drivers are not directly employed by them. However, unlike traditional taxi medallion companies, almost anyone can drive for UberX and competitors like Lyft, Sidecar, etc. In some states the only requirements for UberX drivers are car insurance, appropriate age, health, completion of a driving test, and passing a background check.

Driving For UberX Could Invalidate Your Personal Auto Insurance Policy

Your personal auto insurance policy may not provide coverage for you if you drive for a service like UberX. This is because personal car insurance policies have a list of exclusions, and they often include “driving-for-hire.” If you are driving for UberX or a similar service, you should check with your insurance company to confirm whether your policy covers this “commercial driving.” If it does not, you will want to consider purchasing supplemental commercial auto insurance, though for many part-time drivers, this may not be financially feasible.

Uber Provides (Some) Auto Insurance Coverage… When The App Is On

Uber requires all of their drivers to have car insurance, and provides supplemental insurance coverage, but only while the app is on. Here’s how it works: When the Uber app is off, a driver is covered by their own personal car insurance. When the Uber app is turned on, a low level of liability insurance becomes active. When a trip is accepted, a higher level of coverage kicks in and remains active until the passenger exits the vehicle. Previously Uber had only offered coverage when a passenger was in the car, but the company updated their policy after a series of accidents which resulted in various lawsuits.

Lyft and some of the other ride-sharing services point to the $1 million per incident excess liability coverage that certain states require them to carry. The policies are designed to deal with liability claims, which a driver’s insurance doesn’t cover. But these policies won’t cover a driver’s car – you must rely on your own personal auto insurance policy.

UberX Drivers May Also Need A Commercial Driver’s License

If you drive for UberX or a similar service, whenever you pick up a passenger you are driving professionally. Even though you are an independent contractor, some states will consider you to be a commercial driver. While each state’s laws are different, UberX and Lyft drivers should be aware that your state may require you to have a commercial driver’s license. (Note: Some states only require drivers to have a commercial license if they drive as a full-time occupation.) Check with your state’s DMV for their requirements.

If your state requires you to have a commercial driver’s license when driving for Uber, you could be subject to prosecution if you get into an accident and don’t have a commercial license, even if you have a commercial auto insurance policy. Things may soon get less complicated though. Several insurance companies have recently created unique auto policies that are tailored specifically to drivers of Uber, Lyft, etc. These insurance plans are currently only available in select states, but provide an alternative to a traditional commercial auto insurance policy.

In the end, if you’re looking to start driving for Uber, your best bet is to be upfront with your insurance company about the fact that you’ll be “driving-for-hire”, find out if you need commercial insurance, and find out if you need a commercial driver’s license.

In the meantime, give us a call at (800) 258-5101 to find the auto insurance policy that best fits your driving needs. And you can always get an insurance quote at AnswerFinancial.com.

12 Comments

  1. Bill on June 22, 2016 at 6:24 pm

    I was involved in an accident with an Uber driver. Now we are being told his insurance may not cover it. How do I find out if the Uber insurance will pick up where his stopped ?

  2. Christina on April 21, 2016 at 5:28 pm

    What about a “no fault” state like Michigan? I know liability can be found. How does it affect Uber, Lyft.

  3. simon on April 3, 2016 at 4:14 pm

    What kind of insurance do you need to cover your own vehicle if Uber’s insurance is just covering liability?

    For example: You drive for Uber & have a passenger in your car. You get in a collision where you are liable. Uber’s insurance covers the liability. What do you need to supplement what’s not covered? If your vehicle is financed it has to be covered and personal insurance will not cover you while you are driving commercially.

  4. Pernell on March 13, 2016 at 5:43 pm

    Sorry if you are using someone’s car do u have be on their insurance??

    • dee peterson on August 6, 2016 at 10:15 am

      Yes. If they are aware that you are using their vehicle, you must be listed on their insurance policy as a driver of the vehicle. There are clauses which cover the vehicle for limited use during repairs or due to theft, but if you are a regular driver, you must be listed on the policy. Otherwise, you could be in violation of the contract between yourself and your insurance company, and you and your vehicle may not be covered if you have an accident. Further, this violation will go into the insurance database and list you as a higher risk driver, and you will be subject to surcharges when you try to get another insurance policy. So it’s best to be honest with your insurance company if your vehicle is being used as a commercial vehicle in the same way that a taxi is.

      The old saying, ‘there’s no free lunch’ is applicable here. You can’t just start using your vehicle for a business (which will increase the risk of liability) without incurring extra insurance charges.

  5. Steven Crooks on March 4, 2016 at 8:56 am

    Great article! One other thing worth mentioning is the background check. Uber’s background check is part of the process involved in becoming an uber driver, one of a few requirements. It’s something that all new drivers must go through and is conducted by Uber once supplied with their required information and documents depending on your location.

  6. Jazmine on December 2, 2015 at 6:07 pm

    Well, as Uber requires drivers to have car insurance and will be bounded by the policies if the app is on does still make sense. Great article here!

    • Torr Leonard on December 7, 2015 at 4:53 pm

      Thank you!

  7. Matthew Gehrman on December 2, 2015 at 11:22 am

    Great article!

    I have this conversation with our clients all the time and many of them decide to not drive with Uber. Not only does Uber not cover your vehicle but according to my knowledge they do not extend any first party medical coverage which again leaves the driver high and dry in the event of an at fault accident. There are always growing pains when starting pilot business like this and I hope to see an insurance company step up and create a niche specific commercial auto policy specifically for this type of risk. This is the future of for-hire services and the typical taxi service will ultimately be obsolete unless they find a way to become more competitive.

    • Torr Leonard on December 7, 2015 at 4:53 pm

      Glad to hear you enjoyed the article, thank you for your thoughts.

  8. Don Austin on October 31, 2015 at 1:02 am

    I would like more details on how to become a Uber driver….and how to get started. Also, whose car would I be driving? Is this a lemo service?

    • Torr Leonard on December 7, 2015 at 4:52 pm

      Hi Don, you can find more info on how to become an Uber driver on http://www.uber.com Thanks!

Leave a Comment





[ic_quote]