OPINION: Can carpooling affect your car insurance?

By Vera Nagtegaal Time of article published Oct 3, 2018

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JOHANNESBURG - Motorists slugged with a 99-cent hike in the petrol price this month, following hefty increases earlier in the year, are feeling the pinch. 

With the fuel price at the highest its been, motorists will be keen to cut their transport costs - and carpooling is an appealing option.

All you have to do is find a few people who live along a similar route as you do and split the travelling burden. This involves passengers travelling in a vehicle that is not registered or licensed for commuting purposes.

The simplest way to divvy up the responsibilities is to travel in a different person’s car on different days of the week, but sometimes it makes sense for one person to be the designated driver and charge the others for the fuel.

However, this is where some people start to run into trouble. If you are using one person’s car and money is changing hands, this could potentially be seen by an insurer as a commercial transaction, especially if the money you’re receiving is more than the operating costs. This could mean that your car is being used for business purposes, and you should have a different type of insurance cover and even a special driver’s permit.

Some insurers will consider whether the amount of money changing hands was only sufficient to cover petrol, rather than to earn an income. But find out first. Personal policies exclude transporting passengers for hire or those who pay a fare, and such policies won’t cover liability for fare-paying passengers.

Usually, insurers regard a “fare” as the predetermined amount charged by the owner of the vehicle in return for a service, with the aim of generating a profit.

If you use your car for anything other than personal use, it is essential to update your insurance policy. Failure to do so may lead to an insurance claim being rejected.

What if you want to earn extra cash? Aside from the rising cost of transport, other household expenses are also hitting consumers, so some people might be considering using their cars to make money. But motorists should carefully read their insurance policies to find out what the rules are before attempting to earn additional income in this way.

A number of other car-sharing services have sprung up that allow people to monetise their rides. Most people are already familiar with ride services such as Uber and Taxify, which come with their own set of insurance requirements before the driver can even sign up to the system. But people who are keen on earning money with their cars can also sign up with start-ups such as CarTrip and Rent-My-Ride.

Although these options are great for those wanting to earn a bit of extra cash, drivers must consider how it could affect their insurance policies.

Even if, as in the case of Rent-My-Ride, the app offers its own liability cover, car owners must ask their insurers whether they are at risk of not being covered by their existing policy and therefore should update it if necessary.

The sharing economy offers exciting new opportunities for people to earn an income without having to invest in assets or do extra work. But just because the apps are new doesn’t mean the rules change. People must consider the implications before signing up.

Vera Nagtegaal is the executive head of Hippo.co.za.


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