Beware, shared transport costs may pose insurance problems

MOTORISTS hit by a whopping 82c increase in the price of petrol this month, hot on the heels of already hefty increases in April and May, are feeling the pinch. With the fuel price at its highest point yet, South Africans are looking for ways to decrease 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 cost 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 cost of fuel,” says Vera Nagtegaal, the executive head of Hippo.co.za

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,” Nagtegaal warns.

“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 adds.

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, urges Nagtegaal.

She explains 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,” she adds.

She cautions that 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.”

Aside from the rising cost of transport, other household expenses, such as municipal and utility bills, are also hitting consumers hard. So, some people might be looking at ways to use their personal cars to make money.

Before you do anything, Nagtegaal advises motorists to carefully read their insurance policies to find out what the rules are, before attempting to use their cars to earn additional income.

She points 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.

“Although these options are great for people wanting to earn a bit of extra money, drivers must consider how this affects their insurance policies,” says Nagtegaal.

“Even if, as in the case of Rent-MyRide, 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 adds.

“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,” concludes Nagtegaal. Irene Bailey Newsroom Assistant Manager HWB Communications