What kind of auto insurance do you need if you drive for Uber or Lyft?

This article has been updated from a previous version.  

Driving for a rideshare service like Uber or Lyft can be a great way to earn extra income using an asset you already own: your car.  

But before you start accepting fares, it's important to understand how this new venture affects your auto insurance. Many drivers assume their personal policy is enough, or that the coverage provided by the rideshare company is all they need.  

This misunderstanding can lead to significant financial risk. Without the right insurance, you could find yourself personally responsible for costly damages after an accident. 

What insurance do Uber and Lyft provide? 

Ridesharing companies offer commercial insurance that protects you, your passengers, and third parties, but only when you are "on the clock." The coverage level often depends on your activity within the app. 

For example, Uber provides $2 million of third-party liability coverage and the same amount for uninsured or underinsured motorist protection once you've accepted a trip and are on your way to pick up a passenger or are transporting them. It also includes contingent collision and comprehensive coverage, but this only applies if you already have this protection on your personal auto policy. 

In Ontario, Uber also provides commercial auto insurance for drivers who are logged into the app but have not yet accepted a trip. Lyft offers a similar structure of coverage for its drivers. However, the moment you log off the app, this commercial coverage ends, and your personal policy is expected to take over. 

Keep in mind that Uber insurance policy provides only Standard Accident Benefits, which means that there are no optional increases for things like Income Replacement, Medical, Rehabilitation & Attendant Care, or Death and Funeral.  If drivers need coverage higher than the standard, then they‘ll want to make sure they have their own policy in place with those extra options.

Read more: Everything you need to know when buying car insurance 

Why your personal policy isn't enough 

A standard personal auto insurance policy is designed for just that — personal use. This includes commuting to work, running errands, and going on road trips. Once you start using your vehicle to transport paying passengers, you are engaging in a commercial activity. 

Pete Karageorgos, former director of consumer and industry relations (Ontario) at the Insurance Bureau of Canada, stresses the importance of transparency with your insurer. “When you add ridesharing into the mix, you should tell your personal auto insurance provider because now your personal vehicle is being used for commercial reasons part of the time,” he explains. 

Failing to do so could have serious consequences. If you get into an accident while working for a rideshare service, your personal insurance provider could deny your claim and even cancel your policy, leaving you without any coverage. 

“Part of the reason is that you need to know who is on the hook if an accident happens,” Karageorgos says. Personal insurance won't cover you during commercial use, and the rideshare company's policy won't cover you during personal use. Making sure there are no gaps is your responsibility. 

Read next: How much auto insurance do you need in Canada?  

Do you need special rideshare insurance? 

To be fully protected, you need an insurance solution that bridges the gap between your personal policy and the commercial coverage provided by Uber or Lyft. While these companies provide commercial insurance for when you’re working, you are still required by law to have your own car insurance for personal use. 

All Canadian drivers must have third-party liability coverage as part of a standard policy. Your premium is based on factors like your age, address, vehicle type, and driving record. Adding ridesharing to the equation means you need a policy that acknowledges this specific type of commercial use. 

Will driving for Uber or Lyft increase your insurance rate? 

The good news is that informing your insurance provider about your rideshare activities doesn't automatically mean a major rate hike. Many drivers worry about higher premiums, but the cost of proper coverage is far less than the potential expense of an accident without it. 

Several private insurance providers now offer specific rideshare insurance policies or endorsements that can be added to your personal policy. Aviva Insurance, for example, offers a policy for drivers using their personal vehicles for ridesharing. These specialized policies are designed to provide seamless coverage whether you're on or off the clock. 

It's important to read the fine print, as some policies may have limitations, such as: 

• A maximum number of hours you can drive for a rideshare service per week. 
• Specific requirements for your licence class and years of driving experience. 
• Vehicle capacity limits. 
• The type of service you provide (e.g., Uber vs. Uber Eats). 
• Restrictions against vehicles registered as taxis or limousines. 

Being upfront with your insurance provider is the only way to make sure you are properly protected. Your insurer may offer a dedicated rideshare policy at little to no extra cost. Most importantly, in the event of an accident, you will have peace of mind knowing you're covered, regardless of whether you were driving for personal or commercial purposes.  

Before you sign up with any provider, be sure to compare car insurance rates to find the best coverage for your unique situation. A few minutes of research can help you secure a policy that is both comprehensive and affordable. 

Learn more: How insurance companies make money