How Driving for Lyft Cost Me Over $2,000

This is a story about risk.  The risks we knowingly, and sometimes unknowingly, take during our lives and what we can do to help protect against them.  What better way to teach this lesson than to talk about my personal experience driving for the popular ride-sharing app, Lyft.

Yes, it’s true, driving for Lyft ended up costing me over $2000 at a point in time where every dollar mattered.  I’m hoping by sharing my story, others can learn from my mistakes.

Changing Careers

Our story begins with my career change into financial planning.  I wanted to escape “Corporate America” and follow my passion of personal finance.  I worked hard every evening after work to build up the knowledge I needed to pass the Certified Financial Planner (CFP) Exam in 2016.

When my wife and I started house sitting full-time in January of 2017, we were able to reduce our expenses to a point where I could potentially leave my full-time job to focus on the financial planning business.

In order to supplement our income for a short time, I decided to try making a little money in the so-called “gig economy” by driving for platforms like Lyft (people delivery), GrubHub (food delivery), and InstaCart (grocery delivery).

The process was easy enough to get started.  Just fill out an application online, upload a picture of your driver’s license, get your vehicle checked out, and you were good to go!

I thought this would be a good opportunity to make a little extra money because I could work when I wanted to and I could meet some interesting people along the way.

Due Diligence

Before I drove for Lyft, I knew I was opening myself up to a bit of risk.  One of my close friends, Mat, had driven for Lyft and had his auto insurance policy canceled after getting into an accident while driving.

While Mat was driving a Lyft passenger to their destination, he was rear ended by another driver.  Despite not being at fault, he knew his insurance company would eventually find out the circumstances.  Mat decided to be proactive and called both Lyft and his insurance company to report the accident.

A few weeks later, Mat was surprised to receive a letter from his insurance company stating his policy would be canceled because he was using his car for ride sharing.

Despite the fact that it's illegal, not having car insurance is opening yourself up to significant financial loss, so needless to say, Mat was a bit anxious to sort things out.  "My insurance rate did not increase, but I did have to write a letter to my insurance company stating I wouldn't be driving for Lyft anymore," he said.

"I think the insurance companies have some catching up to do in terms of their policies. Ride sharing isn't going anywhere, and I think insurance companies need to find ways to accommodate this type of job without being an obstacle in the process."

Mat's right.  Ride sharing is a common way many people look to make some extra cash, so I'm surprised that more insurance companies don't offer protection for ride-sharing drivers.  And, if they do, it's costly.

Luckily, Mat wasn't at fault in this instance so the only loss he suffered was the time it took to get his insurance company to reinstate his policy (which they did).   Had he been at fault, there could have been a much bigger price to pay.

From Mat’s cautionary tale, I had to do some of my own research on auto insurance.

Lyft does carry insurance protection for their drivers while on the way to pick up a passenger and while driving the passenger, although it has a hefty deductible of $2,500! (Source: Lyft Insurance)  This means, if you were to get into an accident, you would have to pay up to $2,500 out of your own pocket before Lyft’s insurance kicks in.

But, if Lyft’s insurance policy covers you as soon as you accept a ride, would your personal auto insurance still drop you?

Most likely, yes.

I called my insurance company to find out what would happen if I decided to drive for Lyft and got into an accident.  They said while they probably wouldn’t immediately cancel the policy, they would most likely not renew it.

See, driving for pay on platforms like Lyft, Uber, GrubHub, Postmates, etc. is considered “commercial use” of your vehicle which is not a protection carried on most, if not all, personal auto policies.

Some insurance companies will offer a ride-sharing endorsement on your policy which means they will also cover you if you were in an accident while driving for hire…but expect to pay a much higher price for a policy like this.

Ultimately, I decided to take a risk with my auto insurance. Instead of paying twice as much for auto insurance each month, I would limit the amount of time I drove for Lyft and instead focus more on delivery food or groceries.

I figured, if I was in an accident while doing a delivery for something other than a human being, it would be a lot easier for me to say I was just driving home from the grocery store or picking up a meal.

Lyft Experience

When I was approved to drive for Lyft, I received my fancy Lyft stickers in the mail which I had to put on my windshield whenever I was driving.  I’m sure you have seen other cars with the Uber and Lyft stickers attached.

I was excited to get started and give my first ride.  I thought, this will be a nice way to socialize a bit while we are house sitting and who knows, maybe I might meet someone who is looking for a little financial help along the way!

Turns out, I didn’t enjoy Lyft as much as I had hoped.   In total, I gave about 7 or 8 rides before I decided it wasn’t for me.

Unlike delivering food, you have to worry about the passenger’s comfort.  Am I driving too fast? Too slow? Do they like the music I’m listening to? Am I talking too much? Not enough?  Is the temperature OK?  Also, being in a new city (Phoenix) I was 100% reliant on the GPS directions.  Any wrong turn could upset the passenger into thinking I’m trying to screw them over.  Too stressful for what I was getting out of it!

My $2,000 Mistake

Instead of trying to pick up more rides on Lyft, I decided to focus on doing more food and grocery delivery gigs.  I can sing along to the music I want and I know the food in the passenger seat won’t judge!

I was out making some deliveries one day when I noticed something leaking from the front of my car. Great…just what I need! Luckily, I was able to get it over to the Mazda dealership without needing a tow.

A few days later, I receive a call from Mazda.  “We checked out your car, looks like the water pump needs to be replaced. Due to the location of the part, we will need to remove the entire engine.  Estimated cost, $2,400.”


My heart stopped for a second, but then I thought, Hey…we have that extended warranty still!  When I reminded Mazda about the warranty, they had completely forgotten and said they would give me a call in a few more days to let me know what would be covered.

Short backstory to the extended warranty, right after we purchased our used Mazda CX-9, we had a transmission issue.  The dealership said since we bought it “as is” there was nothing they could do, but would be willing to sell us an extended warranty at close to cost.  We pulled the trigger on the warranty which more than paid for itself with the transmission issue, plus we knew we would have a few years of protection while traveling.

I was cautiously optimistic about our chances with the warranty in this instance.  The warranty specifically covered the water pump, and I had been diligent about keeping up with the maintenance.

Well, a few days went by until I got the call back from Mazda.

“Hello sir…we’re sorry to tell you that the warranty claim was denied.”


“Yes sir, the inspector from the warranty company found evidence of commercial use on your vehicle.  He saw the Lyft stickers you had on the windshield.”

Maybe you can imagine my reaction…What the F***!?!

I couldn’t believe it.  I was crushed.   Oh, and did I forget to mention I had just quit my full-time job?

Yep, just a few weeks prior I officially left my job of 8 years to focus on financial planning.  The extra income I was making while driving was going to be enough to keep us comfortable during this transition.

Now, any income made during my short driving career was completely flushed down the toilet because of those stupid Lyft stickers.

We had no choice but to pay the money to fix the car.  Thank God we had an emergency fund built up to handle these types of expenses, but now was not the time we wanted to be draining that fund.

Since our warranty was garbage now, we also looked to buy a new reliable car that would last us a long time. We did not want to risk anything else going wrong on this car. Yet another unplanned expense, but we decided it was right for us given our circumstances.

I don’t blame anyone else for this mistake but me.  I did my due diligence with the auto insurance and decided to take a risk, but never once did I consider that I might be voiding my extended warranty.  Yes, I was using my vehicle for commercial use, and yes, that is prohibited by the terms of the warranty.

A Teachable Moment

As I said earlier, I’m hoping other people can learn from my mistake.  It’s also a perfect lesson in risk management.

Should you expect companies like Lyft or Uber to warn you about the risks you are taking while driving for their app?  Hell no!  If they did that, no one would drive for them.  It’s up to you to do our own research.

I’m sure most people realize that by driving for Lyft or Uber, they are taking some physical risks.  They realize they might be harmed by a passenger, or get in an accident.  They might even realize that their car will take a little extra wear and tear which will eat into their profits.

How many of these drivers will realize that they are risking losing their own insurance or voiding their vehicles warranties?  I’m guessing not many.

Too many people are blinded by claims that they can make $25-30 an hour, be their own boss, and set their own hours.  The reality is, there are so many costs that come with driving your own car as an independent contractor that will cancel out most of your income.


The takeaway from my story is to make sure you do your homework to protect yourself financially!  Even if you are taking physical risks, there could be a negative impact on your money.

Can you still work if you broke your leg riding your dirt bike? If not, you’re risking lost income.  How long can you stay afloat without your income?

Are you OK voiding your car’s warranty and potentially losing your auto insurance by driving your car for hire? If not, does paying for an expensive commercial insurance policy or adding a commercial endorsement to your warranty make financial sense given the amount of income you’re expecting?

Everyone has their own unique situation when it comes to the risks they take with their finances. This is yet another reason to speak with an un-biased financial professional (like yours truly!) to make sure you are properly protecting yourself, and your hard-earned money, against risks.

Have you experienced a loss while driving for Lyft or Uber? Did you ever lose warranty protection because of decisions you made? Share your story in the comments below!