WHAT RIDESHARE DRIVERS NEED TO KNOW ABOUT GAPS IN COLLISION COVERAGEAre you currently working as a driver for a ride-share company such as Uber or Lyft, or are you considering becoming one to earn some extra money? If you are engaging in rideshare services, it is essential to be aware that your personal auto policy may not provide property damage coverage for rideshare-related activities. And the insurance purchased by the rideshare company might not cover your property damage either, leaving you holding the bag. If you want to be fully covered while working as a rideshare driver, it is critical that you either purchase your own rideshare coverage through your personal auto carrier or obtain a commercial policy.

Insurance for rideshare accidents is complicated. Most, if not all personal insurance policies exclude coverage for accidents that occur while you are performing rideshare-related activities. This means that, as soon as you log into the rideshare app, your personal insurance will almost certainly will NOT apply. And the insurance provided by the rideshare company might not cover property damage to your vehicle, either.

The “phase” of ridesharing you are in at the time of the accident will dictate the availability and amount of coverage. There are three phases:

Phase 1:

Phase 1 is when you’re driving for personal use with the rideshare app turned off. During this phase, you’re considered a private driver and your personal auto insurance policy is the only coverage you have during an accident or incident.

Phase 2:

Phase 2 is when you’re actively using the rideshare app but haven’t yet received a ride request. Phase 2 is important to understand, as your insurance company and the rideshare company’s insurer may have contradictory views on your status. Your insurer will likely claim you are using the car for commercial purposes because you are actively seeking passengers. However, because you aren’t currently on your way to pick up or transporting passengers, the rideshare company will likely categorize you as “not working.” Under this circumstance, New Jersey state law only requires the insurance provided by the rideshare company to provide liability coverage. This means that you are covered, up to certain amounts, if you injure another person or damage someone else’s property. But there will likely be no coverage for damage to your own vehicle if your involved in an accident during phase 2. This is where problems often arise. This means that, unless you purchase additional “rideshare” insurance through your own policy, you will likely have no collision or comprehensive coverage to cover any damage to your vehicle.

Phase 3:

You enter phase 3 when you’re actively using the app and are either transporting a passenger or driving to retrieve a prearranged ride. Under New Jersey law, the rideshare company must obtain liability insurance coverage with and Contingent comprehensive and collision coverage with a $2,500 deductible, up to the cash value of your car (if you have comprehensive and collision coverage on your personal auto policy). But note that the law requiring rideshare companies to obtain insurance for rideshare drivers does not apply to Uber Eats or any other rideshare service involving the delivery of food or other goods. The mandatory insurance statute only applies to situations where rideshare drivers are transporting passengers. This means that coverage for Uber Eats and Doordash drivers is not necessarily required by law.


What this all means is that if an accident occurs during phase 2 (waiting to receive a ride request), there will likely be no insurance available to you to repair your car if you are in an accident. Many insurance carriers offer a rideshare insurance coverage extension, to fill in this gap in coverage. Rideshare drivers would be wise to purchase this coverage.

The information in this post is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.