The change comes after an UberX driver struck and killed 6-year-old Sofia Liu and injured her family members on San Francisco's Polk Street on New Year's Eve.
Uber had initially asserted that the driver, 57-year-old Syed Muzzafar, was an independent contractor who was not responding to a fare and did not have a passenger in his car at the time of the collision.
Attorney Christopher Dolan filed a lawsuit in January against Uber on behalf of Sofia's family alleging that the company should be held responsible for the accident.
Uber officials wrote on their website today, "Since the tragic accident in San Francisco on New Year's Eve, there has been much written about an 'insurance gap.'"
"In order to fully address any ambiguity or uncertainty around insurance coverage for ridesharing services, Uber is becoming the first and only company to have a policy in place that expands the insurance of ridesharing drivers to cover ... accidents that occur while drivers are not providing transportation service for hire but are logged onto the Uber network and available to accept a ride."
The new policy will provide coverage for a driver's liability of up to $50,000 per person for injuries suffered in a crash and up to $25,000 per incident for property damage. Uber already provides $1 million coverage for incidents while a trip is in progress.
Dolan, the attorney for Sofia's family, said Uber's announcement was a step in the right direction but amounted to "throwing a cup of water on a house fire."
"They're in essence saying 'We, the multimillionaires running this company, are going to value the average everyday person on the street as being worth $50,000," he said.
Dolan noted that Sofia's mother has already racked up about $500,000 in medical bills from injuries suffered in the collision.
"When these vehicles cause this type of harm, who's going to pick up the tab?" he said. "It's going to wipe out the savings of both the drivers being sued and the passengers and pedestrians who are hurt."
In its statement today, Uber said it has learned that Lyft, another ridesharing service, will also be rolling out a similar policy in the near future. Lyft officials were not immediately available today to comment.