Carpooling’s a great way to save money. After all, you’re usually not going to be needing the car for the whole day. You’ve just got to get to work and back, or you’ve just got that weekly grocery trip to do. Sharing the ride with others who’ve got the same destination makes financial sense, as long as you’ve got the insurance to cover it.
There’s two main things to look for in carpooling insurance. THe first is liability insurance. Most liability insurance covers passengers, but there are exceptions. A really cheap quote may not cover passengers at all, but that’s rare. The second only comes up if you’re trying to make a profit off carpooling or car sharing. That’s commercial use of your car, and your regular insurance won’t cover it at all.
Don’t carpool for profit!
The big insurance exception is if you carry passengers for profit. The moment you’re charging more than costs, your basic liability insurance won’t cover you anymore. That’s because any time there’s a profit, insurance considers it a business operation. As soon as profit’s involved, it’s just the same as a taxi, even if you’re charging a lot less money.
However, it’s completely okay if everyone involved in the carpool chips in to cover costs. That’s not a profit. Here’s a typical cost chart that covers the car’s maintenance as well as the gas. If there’s parking or toll charges on the carpool route, you can add those in as well.
More passengers means higher liability
If you get into a serious accident, it’s a good bet everyone in the car’s going to be hurt. That means your potential liability is multiplied by the number of passengers. However, a lot of insurance plans have a cap on liability costs.
If you carpool regularly, it’s a good idea to double your liability coverage. That won’t usually cost a lot in extra premiums, peanuts compared to everything else. If you ever need it, the higher cap will be worth every penny. Notice how liability insurance coverage is specifically mentioned on this new carpool discussion checklist.
Peer-to-peer car sharing
As long as you’re doing it not for profit, peer-to-peer car sharing still falls under the carpooling and passenger rules. Your car insurance covers most people who’d be driving your car legally with your permission. However, you’ll want to check with your insurance company to see if that includes total strangers. It’s usually meant to be family and neighbours.
For-profit peer-to-peer car sharing’s a whole different story. For insurance purposes, this isn’t considered carpooling at all. It’s considered car renting, and that’s a whole different ball game.
If you’re renting your own car out under a for-profit peer-to-peer organization, you’ll have to get appropriate business coverage. Sometimes you’ll be able to get that insurance through the organization. Otherwise, you’re on your own.
If you’re a member of ZipCar or a similar service that lets you borrow cars for a couple of hours at a time, you should be dealing with insurance the same way as you would with a standard rental car. Again, sometimes the business already has a setup for this, and all you’ve got to do is sign and pay the premium. Always read the fine print carefully before committing to a membership.