A Career In Ridesharing? Here’s What It Could Mean For Your Auto Insurance

In what is becoming an increasingly popular phenomenon, Lyft, a ridesharing service matching regular drivers with passengers in need, expanded into 24 new cities on Thursday, marking the company’s largest single-day expansion ever.

Mashable notes that the move means Lyft “now operates in 60 US cities, surpassing competitor Uber which currently operates in 46.”

(Uber has more cities worldwide, however.)

Lyft co-founder John Zimmer told the website that the process was “more complex than simply flipping a switch on the app,” adding that to ensure supply meets demand, “each new city will start with roughly 100 drivers, who have all been vetted by Lyft employees ahead of time.”

The life of a ridesharing driver appears to be an attractive one, no matter which company you’re talking to. For example, Lyft competitor Sidecar, notes that its drivers “are making up to $35 an hour and choosing their own hours” and “Just a few hours of driving can help cover costs for parking, insurance, repairs, and gas.”

In troubled economic times, the idea of “making your own way” is one that drivers find appealing, but there are some things you should keep in mind if you’re considering this path, particularly from an auto insurance perspective.


Carpooling vs. Ridesharing

Lyft qualifies as a ridesharing service because it entails using your car to transport another driver in exchange for payment. If you are transporting someone for non-monetary gain, that’s carpooling and largely approved by insurance companies. But since we’re talking about the commercial purpose of ridesharing, it will not be.

Bankrate contributor Jay MacDonald explains: “If you drive as a member of a carpool, your auto insurance company has already given you the green light in its standard contract as long as you make no money from it. However, if you use your car as a taxi or livery service to carry people or property for profit, individual coverage is typically excluded.”

That’s why Lyft and Uber and other ridesharing services carry a policy on each driver — usually around $1 million worth of coverage — though it’s often not in effect if a driver is on the road but without a fare. In those cases, the driver’s personal policy will generally offer coverage. If a claim is denied, the ridesharing service may step in with a contingent policy, however.


More Driving Equals More Risk

If you’re approved as a driver for a service like Lyft or Uber, then you’re probably good-to-go from a coverage standpoint, but it’s important that you realize the risk involved in spending so much time on the road. If it’s your primary way of earning a payday, as it is for so many, then you’re going to face greater likelihood of a claim.

Minor or major, claims can affect your auto insurance premiums and possibly your livelihood depending on the nature and the fault of the accident. Signing up with such a service offers a great opportunity to revisit your coverage limits and ensure that your personal policy is where it needs to be rather than the bare minimum.

Lyft and Uber’s substantial commercial policies that they have in place for each driver will probably cover damages, but it may not help if you experience an accident on the way to pick up a fare.


In Summary

The ridesharing genie is out of the bottle, so to speak, and with it, many states are viewing it as an innovative business model rather than a standard taxicab service. It’s opening more doors for people to build extra, or even full-time income, through standard driving. But if you’re thinking about it, be aware that laws regarding insurance vary from state to state, and it’s your obligation to get educated on the topic before taking your first fare.

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