Rideshare has exploded in popularity over the last few years thanks to companies like Uber and Lyft. Uber is responsible for one million rides per day, for a total of 140 million rides in 2014. Lyft reportedly assists people with one million rides a week.

These numbers mean both companies have to hire thousands of employees to meet the demand for rideshare. Lyft has over 100,000 active drivers. In December 2014, Uber had more than 162,000 active drivers. On top of that, The Washington Post reported the amount of new drivers who sign up has doubled every six months in the last two years.

Rideshare Driver Benefits and Criticism

As positive as that sounds, Massachusetts Senator Elizabeth Warren is speaking out against rideshare companies. During the New America Foundation's annual conference in May, she criticized Uber and Lyft for not giving drivers enough benefits.

Warren specifically wants them to receive:

  • paid time off
  • catastrophic health insurance
  • Social Security

This raises the question of whether rideshare drivers are full-time employees or contractors.

Uber claims its drivers enjoy the freedom of being self-employed. They set their own hours, and choose what rides they accept.

Because they’re contractors, though, they aren’t protected like full-time employees.

"The much-touted virtues of flexibility, independence, and creativity offered by gig work might be true for some workers under some conditions," Warren said. "But for many, the gig economy is simply the next step in a losing effort to build some economic security in a world where all the benefits are floating to the top 10 percent."

Warren later brought up the past quarrel between rideshare companies and the city of Austin, Texas. She pointed out the former didn't want to follow rules to ensure user safety.

In Austin, drivers would need a fingerprint background check before working for Uber or Lyft. The companies responded this was too demanding for people who wanted to make a couple of bucks on the side. As a result, both stopped offering their services in that city.

Warren's scrutiny follows past comments against rideshare companies for not offering adequate car insurance.

Now, however, they’re being forced to take on additional insurance responsibilities. We'll go over their policies below.

Rideshare Car Insurance

Senator Warren's criticism over drivers’ benefits—or lack thereof—brings up the question of what type of insurance rideshare companies supply their contractors.

Uber and Lyft don't provide traditional employee benefits like health insurance. However, they do offer car insurance.

The amount and type of coverage varies. This is based on if a driver:

  • Is on the app without a passenger (Period 1)
  • Has accepted a ride and is driving to pick up the passenger (Period 2)
  • Has a passenger in the car (Period 3)

Period 1: Using the app without a passenger

If you have a car, you at least need to have liability insurance to drive for Lyft or Uber. Your personal insurance covers you when you're driving but the app is off.

Once you turn on the app, most insurance companies still cover drivers on their personal policy. This also applies when you're between passengers.

If your insurer doesn't cover you, Uber and Lyft both provide the following:

  • $50,000 injury per person
  • $100,000 per accident
  • $25,000 property damage

These coverage amounts meet the minimum liability requirements in every state. Still, you may want to get more coverage if you're a rideshare driver.

Experts say you should buy as much of this kind of insurance as possible. Typically, they suggest at least:

  • $100,000 of bodily injury coverage per person
  • $300,000 of bodily injury coverage per accident
  • $50,000 of property damage coverage

As you can see, rideshare companies may not give drivers enough insurance if a serious accident occurs.

If your insurer won't cover you when you have the rideshare app on, another option is to buy commercial car insurance.

Contractors may also want to consider a rideshare friendly policy. Here are some of the companies that selling this kind of insurance:

Period 2 and 3: Picking up a passenger and driving with a passenger

Once you have a passenger in the vehicle, Uber provides more insurance coverage until the trip ends. It offers:

  • $1 million per incident liability coverage
  • $1 million uninsured/underinsured motorist injury per incident
  • Contingent collision and comprehensive up to actual cash value ($1,000 deductible)
  • No fault coverage (personal injury protection)

Note that Uber provides collision and comprehensive only if a driver already pays for these kinds of coverage as part of their personal policy.

Lyft offers drivers who have a passenger in the car:

  • $1 million liability insurance per incident
  • $50,000 contingent collision and comprehensive insurance per accident ($2,500 deductible)

One more thing to keep in mind here: you have to let your insurer know about your side job. If you don’t, it may deny your claim.

Want to know more? Read our article on "Car Insurance for Rideshare Drivers."