I recently had some contact with a colleague looking for assistance with a friend who had a car accident while working but didn't have commercial vehicle insurance.
- You have a car.
- You use it mostly for private use.
- You have comprehensive car insurance.
- You are involved in a hobby or sideline to your normal occupation.
Now, many people take the approach she'll be right, because when they last read their policy document, as an 18-year-old with their first car, it either said incidental business use was covered, or it could be covered, you just needed to let them know.
For the most part, people forget and get on with it. It was just that one time or I have only just started, are often comments at claim time.
So what constitutes a 'business' rather than personal when it comes to car insurance?
Business use means a car that is used as part of any work or business, or that is used to generate income or reward.
Seems pretty straightforward?
No, not so much.
Thinking about this, in your typical paid job it is easy and straightforward. What about that sideline 'hobby' business or multilevel marketing gig you have signed up to?
This is the rub, most people say hobby, but if you are expecting to receive money or reward for what your hobby produces, it is a business.
The IRD certainly wants to know in case you need to pay tax; the insurers take a similar line on the definition. Not that I really want to link IRD and insurance together, but you get the point.
Then there's transporting your products and 'samples' so all you Amway, Scentsy, Herbalife, Doterra, Mary Kay, Arbonne, on the way out Avon, and others, this includes you too.
One insurer's definition in their private motor policy is quite clear.
However, there is no cover while your vehicle is being used for either of the following:
- the carrying, hauling or towing of stock, merchandise or hazardous chemic
- also in connection with any trade or business orhire, or to carry fare-paying passengers.
You must tell us if you change the use of your vehicle or your business, profession or occupation changes.
Moreover, this is where the surprises come from.
I have had a closer look at some of the more common policy wordings my clients tell me they have.
Most private motor insurance policies can add business use, but until it is added, you have no cover.
With some of them, they'll let you use it for business use, but they all still have the transporting stock & merchandise exclusion, even if it has been noted for business use.
This is where you need an adviser.
Depending on the insurance provider and the policy you may be able to have your private motor policy cover you for business use, but it still may not cover you for the activities you are doing because of the transport exclusion embedded in the policy.
- If you are transporting yourself for business purposes, then the business use definition on most private motor policies will probably cover you.
- If you are; carrying, hauling or towing of stock, merchandise or hazardous chemicals in connection with any trade or business, then you need to have a commercial motor policy.
No, a commercial motor policy is not a private motor policy with a business use extension, it is a commercial motor policy designed for the business environment and its associated risks.
Ok, I hear you say but what I am transporting is domestic in application, oils, cosmetics, household goods, etc. Moreover, yes I hear you there. Likely the risk is no more than that of you driving home with your groceries.
However, the situation the insurer is managing the risk for is not you doing your groceries once a week but you doing this all day every day.
In an accident situation, it is possible, with concentrated levels of products, that the loss to the insurer is higher. This is from both the physical impact inside the vehicle, but also the fire and contamination risk that comes along with many products when concentrated and spilt in an accident.
You have a choice, and we respect that.
At the same time having the right cover in place before an event is far preferable to trying to argue a claim at claim time. Most of the time when the cover in place is not the right cover, the claim outcome is poor.
We like to avoid poor claim outcomes by providing great advice upfront before you need to claim.
And yes, commercial motor insurance is often more expensive than private motor insurance, but not always.
Give us a call, contact us here, or
and get your vehicle cover sorted.
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