Rideshare companies like Uber and Lyft have taken off in the last couple of years—and in more ways than one.

Yes, they’ve offered up a new way of hailing a ride. But they’ve also provided new means of employment.

Both aspects have attracted the attention of legislators who want to keep the public safe and also protect the growing number of rideshare drivers.

In fact, 34 states have passed laws that address this market. That number could increase to 35 soon. Alabama recently moved to join the club.

What is SB 262 and Why Is it Needed?

Most rideshare drivers know they need car insurance to work for Uber or Lyft. What many don’t know is insurers can choose to not pay for losses or damages tied to that work. This is because most personal auto insurance policies don't cover commercial use of a vehicle.

States like Alabama are trying to close that gap. In particular, Senate Bill 262 (SB 262), signed on May 16, requires rideshare drivers to maintain $1 million of liability coverage while on the job. It also requires them to be covered from the time their ride-hailing apps are turned on until they’ve been turned off.

Logan McFaddin, state government relations regional manager for the Property Casualty Insurers Association of America, responded by calling SB 262 " a common sense approach” to regulating transportation network companies, or TNCs.

This approach was needed, he said in a recent statement, because many TNC drivers don’t “realize their personal auto insurance policies contain a specific livery exclusion which bars coverage if the car is used to transport passengers for a fee.” SB 262 should “bring clarity and close the insurance coverage gaps and other issues that could leave the public at risk.”

In 2016 alone, five other states have passed laws that aim to do the same thing. These other states are Mississippi, New Mexico, South Dakota, West Virginia, and Iowa. Alabama's bill is a lot like the one Iowa passed. Both require drivers to have the following coverage types and amounts:

  • $50,000 per person
  • $100,000 per accident
  • $25,000 for physical damage

Another state that passed a law like Alabama's is Texas. Drivers there also have to carry car insurance coverage of $50,000 per person, $100,000 per accident, and $25,000 for physical damage. Something to note here is that these coverage amounts are well above state minimum requirements.

What are Some of the Other Car Insurance Implications of SB 262?

Lyft and Uber cover drivers when their personal policies don’t. Specifically, they provide comprehensive collision and liability coverage. They also provide uninsured or underinsured motorist coverage.

This coverage kicks in as soon as a driver logs on to the Uber or Lyft app and lasts until they log off.

Below is a breakdown of what each company offers rideshare drivers:

Uber and Lyft

  • If your insurer doesn't cover you, both TNCs provide:
    • $50,000 injury per person
    • $100,000 per accident
    • $25,000 property damage

Uber

  • Once paired with a passenger, Uber provides:
    • $1 million of liability coverage per incident
    • $1 million uninsured or underinsured motorist injury per incident
    • Contingent collision and comprehensive up to actual cash value ($1,000 deductible)
    • No-fault coverage (personal injury protection)

Lyft

  • Once you have a passenger in the vehicle, Lyft offers:
    • $1 million of liability coverage per incident
    • $50,000 contingent collision and comprehensive insurance per accident ($2,500 deductible)

Keep in mind that these coverage amounts may not fully protect you if you’re a rideshare driver. Also, the company that provides your personal insurance might deny your request if you file a claim tied to your ride-hailing activity.

Speaking of which, here are some of the insurers that sell rideshare friendly policies:

  • USAA
  • Progressive
  • Metromile
  • Liberty Mutual
  • Geico
  • Farmers

Some of these carriers offer coverage in all states and some don’t. Also, some charge rideshare drivers higher rates. To get the best rate for the coverage you need, compare quotes from multiple insurance companies.

Learn more about Lyft or Uber insurance in our article, “Car Insurance for Rideshare Drivers.”