Make sure your insurance policy allows you to carpool.
With the current fuel prices, one way of reducing your fuel bill is to carpool with friends or colleagues.
Yet, have you read your insurance policy – or better yet, checked with your broker – to determine what is and what is not allowed in this particular scenario? Because the buck you are saving now could turn into a major loss should something happen.
Most insurance policies have limitations that could result in the repudiation of a claim if you did not comply with the contract. The CEO of MasterDrive, Eugene Herbert, provides some facts to keep in mind if you are, or plan on, carpooling.
For the individual
There are various ways to carpool, and each one can have its own unique effect on your insurance.
If one person is the driver all the time and is reimbursed for the cost of the trip, including fuel and maintenance, many insurers need to be aware of this, but it may not change your premium as you are not profiting from the arrangement.
When you do make a profit from carpooling, it is considered a commercial transaction. Your insurance policy may change to a business policy, increase your premiums or no longer cover you if they have not been informed and you are in an accident.
Personal policies also do not assume liability for fare-paying passengers.
Alternating drivers, where no money exchanges hands, is often the least risky option, but insurers still need to be informed. Bear in mind your policy may cover only designated drivers.
In some instances, insurers may even reduce your premium (if they do not offer, then ask) because you are driving less.
If you use your vehicle all the time but you allow others to drive it, do not forget to list them as secondary drivers with your insurer.
For the business owner
If a company allows employees to use a fleet vehicle for personal travel, you may also be required to advise your insurer or broker.
Your insurer, in the case of companies, may have certain requirements when it comes to where vehicles are kept overnight. Ensure that if you do allow employees to take a vehicle home, they meet these requirements, or inform the insurer of this.
In both cases, you may also require PrDP licensing if you make a profit from passengers. In terms of government legislation, one would then, in effect, be carrying passengers for reward.
It varies between insurance policies, and the first step before making a carpooling agreement is to determine what your policy allows. “It is essential to check in with your insurer regularly. If anything changes with the usage of your car, whether it be the driver or the transportation of people, it can and most probably will affect insurance premiums. Neglecting to inform your insurer may result in a much bigger loss than a higher premium will,” said Herbert.