LIFESTYLE
12/06/2018 11:23 SAST | Updated 12/06/2018 11:23 SAST

How Carpooling Can Affect Your Car Insurance Claim

A claim may get rejected because the 'regular driver' wasn't in the driver's seat when an accident happened.

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Carpooling has become an appealing option to save costs, as South Africans continue to find ways to deal with 2018's third consecutive fuel price hike earlier this month.

This trend of driving in groups may stick for a while, as the Automobile Association has warned of another petrol increase in July.

In light of this, experts have cautioned car owners to review their insurance policy packages, as carpooling can affect their insurance payouts, should they claim.

1. The issue of the 'regular driver'

"Sometimes it makes sense for one person to be the designated driver (even if they don't own the car) and charge the others for the cost of fuel," said Vera Nagtegaal, executive head of insurance company Hippo.

The designated driver, however, may likely not be the 'regular driver' quoted in insurance policy documents.

Should your car get into an accident, if the person behind the wheel is not considered the car's 'regular driver', it may affect your claim, resulting in it being rejected altogether.

Some insurers may even ask you to name all the drivers, so check with them or your policy document to be 100 percent sure, before you hand over your keys to your colleague to drive you to work.

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.

2. Carpooling as a commercial transaction

"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," Nagtegaal warned.

"In this instance, 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 permit to be in the driver's seat," she added.

Some insurers will consider whether the amount of money changing hands was only sufficient to cover fuel, rather than to earn an income. But find out first, urged Nagtegaal.

She further explained that 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."

So 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," she said.

People must consider the implications before signing up for the next profitable sharing service.

3. Generally using your car to earn additional income

If you are looking at other ways to use your personal car to make money, Nagtegaal has advised that you carefully read your insurance policy to find out what the rules are, before attempting to use your car to earn additional income.

She pointed out that 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 like 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.

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

"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 for the next profitable sharing service," concluded Nagtegaal.