Carpooling and insurance
The effects of carpooling on your vehicle’s insurance
Carpooling, a lift club or ride sharing is a growing phenomenon in the light of environmental concerns, traffic congestion, convenience, and the lack of parking. Many parents make use of such an arrangement to get kids to school or extra mural activities, while students who are lucky enough to have a car will give lifts to their classmates.
With everyone trying to save money where they can many more commuters are considering carpooling or setting up a lift club. However vehicle owners should double check with their insurance provider about what is allowed under their policy when it comes to ride sharing.
If you are always the driver in the arrangements and passengers reimburse you for fuel and maintenance, you will need to make your insurance aware of this arrangement as your premium is determined according to the most frequent usage of the vehicle, be that personal or business use.
If you make a profit from your lift club, it could be considered a commercial transaction and your insurance policy might be required to change to a business use policy, which could mean an increase in premiums. If your insurance is not made aware of this arrangement they could decide to repudiate a claim should you be involved in an accident.
Motorists also need to be aware of the fact that personal insurance policies will not assume liability for fare-paying passengers, so in the event of an accident you could be held personally liable by your passengers for injuries or damages.
Alternating drivers, where no money changes hands, is the least risky carpooling option, but it is still important to inform your insurance. In many cases insurance policies only cover designated drivers or they could impose a higher excess if a claim is submitted as a result of a non-regular driver or a driver under the age of 25 being behind the wheel at the time of the incident. If co-workers are driving your vehicle it is a good idea to add them to your policy as a regular driver.
An advantage of taking turns to drive to work is that in many cases your insurance company could lower your premium if you are covering less mileage on a monthly basis.
Business owners also need to be aware of certain requirements for the use of vehicles and the differentiation between personal and business use and the effects that it has on their insurance policy.
If a company allows employees to use vehicles for personal travel, such as to and from work, the insurance company should be notified.
For instance, insurers may have certain requirements regarding where vehicles are kept overnight, such as in a garage or behind a locked gate. Insurance premiums are also calculated on the suburb in which vehicle is kept, so if a vehicle is stolen at night from a high risk suburb, that is not listed on the policy, the insurance company could decide to repudiate the claim.
Business owners need to make sure that if employees are travelling home with vehicles, the storage conditions meet the requirements of their policy or the policy needs to be updated accordingly.
Every insurance company and insurance policy has its own requirements, however the most important factor is to be honest with your insurer about how your vehicle is used and to discuss or notify them on any changes to the regular usage to insure that you are sufficiently covered in the event of an incident.