Rising auto insurance costs have some gig workers rethinking coverage for their side hustles
Bankrate’s Side Hustles Survey discovered that more than one-third (36 percent) of U.S. adults earn extra money beyond their main source of income through a side hustle. While gig work, like rideshare driving, is one of the most popular side hustles, the average cost of full coverage car insurance has increased 31 percent since 2023, and drivers may feel the burden of these rising costs cutting into their profit margins. On top of that, standard auto insurance doesn’t cover incidents that occur while using your vehicle for commercial purposes, so many gig workers must purchase a rideshare endorsement from their car insurance company — increasing their premiums even more.
Along with rising gas and car maintenance costs, paychecks aren’t stretching as far as they used to. Is this popular side hustle even worth it anymore? “I make good money, but a lot of people don’t,” says Nafiu H., an Uber driver based in Atlanta. “You must live in the right location and have a car good enough for at least Uber XL.”
It was easier a few years ago when car insurance wasn’t so expensive.
— Nafiu H., Uber driver
Rideshare coverage adds to already-high insurance rates
Rideshare insurance is an endorsement added to your car insurance policy intended to avoid the coverage gap between your policy and the coverage offered by your transportation network company (TNC). Your car insurance policy provides coverage when driving your vehicle for personal use. However, once you log into the rideshare app, your coverage stops, unless you have a rideshare endorsement.
To understand when your personal insurance coverage stops and your TNC coverage starts, rideshare providers break down your TNC coverage into three different time periods:
- Unavailable: Rideshare app is off
- Period 1: Available
- Period 2: Trip accepted, en route to rider
- Period 3: Trip begins, pick up and drop off rider
Whether your side gig is an app-based delivery service or ridesharing, only limited TNC coverage kicks in during period 1, when you become available in the app. Once you accept a trip, you’ve started period 2, and the TNC coverage increases. If you have a car crash during period 1, you are potentially in a coverage gap, since limited TNC coverage does not include comprehensive or collision coverage and has lower liability limits.
Both Lyft and Uber provide liability-only coverage during period one, with 50/100/25 limits. In states requiring additional coverage types, TNCs will meet minimum coverage requirements. If you are responsible for an accident where the damage exceeds these limits, you will be on the hook for paying the difference out-of-pocket, plus the cost of repairs for your own vehicle.
Once you are in periods two and three, your TNC coverage increases to $1 million for third-party liability in most states. Lift and Uber will also cover comprehensive and collision damage to your vehicle during these periods, with a $2,500 deductible. Drivers aren’t exempt from the costs associated with this TNC coverage. Most rideshare services charge drivers a commercial insurance fee — usually a percentage of their ride fare — to pay for this coverage.
The advent of ridesharing as a side gig was something the insurance industry had to catch up to. If you drive for Uber or Lyft, adding a rideshare endorsement can help keep you financially protected behind the wheel, so your side hustle can be a hustle — not a drain.— Natalie Todoroff, Bankrate insurance analyst
Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Compare auto insurance rates
Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
How are rising insurance rates affecting rideshare drivers?
Rising insurance rates impact most drivers, but due to the nature of gig work, high car insurance rates may be hitting rideshare drivers more. Along with the added cost of a rideshare endorsement, rideshare drivers usually have higher annual mileage than average drivers.
High annual miles and driving in inclement weather and unknown locations increase the risk of an accident. Drivers who transport passengers also have a higher risk of a lawsuit from an at-fault accident. For years, rideshare drivers operated in a gray area, not having insurance if they caused an accident and risked being dropped by their carrier when they called to inquire about buying coverage.
In 2014, states began adopting laws requiring rideshare companies to provide drivers auto insurance coverage when they were on the clock. Slowly, insurance carriers began offering rideshare endorsements to cover the risk not covered by TNC policies.
According to a report from Lyft, in 2023, the median U.S. driver drove 1,647 engaged miles on the platform and less than 20 hours a week on top of the miles they drive on their personal time. Especially if you are in an area with a high ride-sharing demand, your side gig could quickly drive up your annual mileage — a key policy rating factor.
For example, if you drive 150 miles per week for a ridesharing service, you add an extra 7,800 miles to your overall annual mileage. Insurance carriers commonly consider anything over 18,000 per year high mileage use, which can drastically increase the rate of your car insurance.
The national average car insurance rate is $2,638 per year for full coverage. This is up 31 percent from January 2023, when the average rate was $2,013. Like a typical car insurance policy, the price of a rideshare endorsement depends on several rating factors, such as driving history, annual mileage, vehicle type and more.
Rideshare rates vary significantly between carriers as well. State Farm states that its rideshare coverage usually adds 15-20 percent to your premium. Mercury Auto, one of the first carriers to offer this coverage, says its coverage starts at just $0.90 per day.
Commercial auto insurance costs have also increased over the past few years due to a rise in third-party litigation in the trucking and commercial sector. This directly affects how much Uber and Lyft pay for commercial insurance and how they charge drivers for the per-ride commercial insurance fees. And whether drivers with rideshare endorsements are exempt from commercial insurance fees is unclear. Some drivers report being able to opt out by contacting the companies they work for, while others have accepted these duplicate costs as the price of ensuring full financial protection while on the road.
For drivers on a budget, dropping coverage may seem like the only option
Our Side Hustle Survey found that more than 1 in 3 (36 percent) of U.S. adults with side hustles use this income to pay for regular living expenses, like food and housing. Side hustlers report making an extra $891 on average per month in addition to their main source of income, but if the cost of your car insurance has increased by nearly a third, many drivers may feel pressure to choose between reducing their coverage or dropping their gig.
Nafiu H. decided to drop his rideshare endorsement due to how expensive his car insurance became: “I started driving for Uber three years ago,” he says. “My car insurance was around $330 per month, but it kept going up. When my policy was renewed a few months ago, it was more than $500 per month.” He says that eliminating his rideshare endorsement saved him about $200 monthly on his Georgia auto policy.
Bottom Line
For rideshare drivers paying for a personal auto policy, rideshare endorsement and commercial insurance fees from their company, rising auto rates may be hitting their budgets especially hard. To keep these costs from cutting into their profits, some gig workers may choose to drop their rideshare endorsement or reduce their auto coverage limits. But this can lead to financial exposure that could far outweigh the extra cash you save on your premium.
Rideshare drivers struggling to afford coverage may be able to find cheaper car insurance by comparing premiums between several carriers. Remember that not all insurers offer rideshare coverage in every state. Some factors, like a good driving record or having a high-valued vehicle, could make you ineligible for coverage with your current carrier. You may need to be flexible and switch carriers to find the best rate. Aside from that, the tried and true methods of keeping a clean driving record and looking for car insurance discounts to lower the cost of car insurance will still apply.
You may also like
How a speeding ticket impacts your insurance in Michigan
Car insurance for high-risk drivers in Texas
Auto insurance after a DUI in Georgia