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Could Carpooling Impact Your Insurance?

With the price of fuel at an all-time high, you’ve joined a carpool to save on transport costs. Smart move! But, how does carpooling impact your car insurance? We took a closer look.

Many among us who live in the city may elect to just Uber everywhere. It could save time and money and the hassle of finding that ever-elusive parking spot. For many more, though, that’s not really an option. So, what to do? 

Carpooling has become an increasingly attractive alternative for South Africans who commute far distances to work and back. This also affords the above mentioned benefits, and with the way the price of fuel is going these days, we need every benefit we can get. We need to do whatever we can to save money right now – and carpooling is certainly a means to do so. Plus, it eases congestion on our highways. 

There are, however, a few things to consider with regards to your car insurance. In many cases, there are implications for your insurance policy and premiums when it comes to offering your car up for carpooling. It’s wise to inform your insurer or broker if you’re planning on this, and find out what those snags are. 

Here are a few things to keep in mind. 

While You're Here: Be Aware Of These Common Insurance Exclusions

Different Types Of Carpooling

There are a couple of different arrangements you could enter into when carpooling. The nature of this arrangement has a direct influence on how your insurance will be impacted. Examples of the different types of carpooling arrangements are:

Designated Driver Carpool – This involves a single driver providing the vehicle, and the passengers are required to pay a weekly or monthly fare. This fare covers expenses such as parking, petrol and maintenance.

Employer Carpool – Employers will often allow their employees to make use of company vehicles for carpooling. This is akin to arranging transport, such as a taxi – except that the employer owns the vehicle. Employees may also be liable to pay a monthly fare to cover fuel, insurance, maintenance or the hiring of a driver.

Alternating Carpool – This is the most common arrangement. Several drivers will alternate the use of their cars on a rotating basis. One week so-and-so drives and uses her car, next week such-and-such drives and uses his car, etc. Each driver will cover all costs themselves during their turn, and no money exchanges hands.

So, there are a number of factors which insurers might take into consideration here. Do you receive payment from your passengers? Does another motorist ever drive your vehicle? How many people are part of your carpool? And then, of course, there’s the matter of imposed liability. Are your passengers aware that, in the event of an accident or injury, they will not be allowed to claim from you? No, they will have to claim from the Road Accident Fund. 

Let’s take a look at the problems you may encounter with regards to your car insurance.

Who Is The Regular Driver?

In the designated driver carpooling arrangement mentioned above, there are often situations when the regular driver listed on the insurance policy isn’t the actual driver at the time of the incident. One person, for example, may be elected the designated driver even though they don’t actually own the car. In the event of your car being involved in an accident while this other person is driving, it may affect your claim. It could even be rejected altogether. 

Remember – insurers insure you from loss or damage, not the car itself. Therefore, they expect you to be the person behind the wheel. If you own an insurance policy, insurers will often request that you list all drivers of your vehicle. So, before you hand your keys over to anybody, make sure that your insurer is aware of them. 

When it comes to exchanging money, things become a little trickier. This arrangement could be seen as a commercial transaction – particularly if the money you receive is more than the actual operating costs. This means you are profiting from the arrangement, and it has become a means of income.

Is It A Commercial Transaction?

Insurers will look at the amount of money which changes hands and the distance travelled in order to determine if you’re just covering the basics of the trip or if you’re earning an income from it. If you’re making a profit from the money you receive from your passengers, this can be seen as a commercial transaction. A business, if you will. 

If your car is being used for business purposes, then you need an entirely different type of insurance cover. Personal policies will certainly not cover liability for fare-paying passengers. So, if you’re driving and your vehicle is involved in an incident and the passengers are injured – they’re on their own. 

A fare, of course, can be defined as a predetermined amount charged by the owner of the vehicle in exchange for a service in which the ultimate aim is to generate any profit. In most cases you’ll also need a special permit to transport fare-paying passengers, such as a PrDP.   

It’s worth mentioning that the same applies for any incident where you’re using your vehicle in order to make money. Whether you’re transporting passengers or making deliveries.  

Problems You May Encounter With Insurance

It’s incredibly important to review your insurance policy packages. Speak to your insurer or broker to avoid disappointment, should the need to claim ever arise. When informing the insurer, several actions could be taken to accommodate you. Your insurer could increase your premium, impose an additional excess amount or change your cover completely from private to business use. 

There’s also bad news, depending on the insurer. If you’re the sole driver and accepting payment from all passengers, you may find that your policy excludes cover. The exemption to this is if you could prove that the compensation you receive is only sufficient to cover the basics. Failing to do so could result in your future claim being rejected. 

Sure, you may end up paying a little more money for the change, but its way better than the alternative. 

The ideal scenario for carpooling, then, is one of alternating drivers. Everybody takes turns using their own vehicle and covering the costs themselves. Therefore, no money exchanges hands, it’s not a business, and insurers will be happy to accept this. 

In fact, if you’re with a great insurer, you may even find that your premium is reduced due to the fact that you don’t use your vehicle that often.  

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