Business or personal – Getting car cover right

Our cars are like an extension of ourselves. We use sedans, convertibles, hatchbacks, SUVs, vans and utes to help us do whatever we need or want to do. There’s a continuous spectrum of vehicle use out there. It ranges from something like visiting friends on the weekend, all the way up to carting tools around or carrying paying passengers for self-employed work. Somewhere along that line personal use becomes business use. That’s when the type of car insurance you need changes.

This article is designed to help you get started on deciding whether you need to talk to your insurer about cover for business use. If you have any doubt, simply call them and ask.

Depending on your type of business and how often you use the vehicle for work, there may be very little difference to your premium, if any. It could mean simply noting some business use on your private motor vehicle policy or getting a commercial motor vehicle policy instead. You won’t need both types, because commercial motor vehicle insurance usually covers business and personal use. The most important thing is to know you’re covered.

What counts as personal use of a vehicle?

Personal or private car insurance policies usually say you’re only covered for domestic, social or recreational use. As you’d expect this includes taking the kids somewhere, going shopping, visiting friends and family, or getting away for the weekend. It also includes using your car to go to sports and hobby places – like pottery classes, the gym, tennis, golf, your favourite surf break and so on.

Driving to and from your regular workplace typically counts as personal use as well, even if you have workmates in your car who contribute to the fuel costs. You can probably sense we’re getting close to the line between personal and business use now, so let’s have a look at what’s not covered.

What car use is not covered by private car insurance?

You probably won’t be covered by private car insurance when your car is being used for something that earns you money or an income. Insurance policies usually describe this by using words like ‘commercial activity’, ‘commercial venture’ or ‘any activities in connection with a profession, occupation or business’.

Here are some common full-time or side-gig examples:

  • Courier or delivery work
  • Taxi or Uber services
  • Driver training
  • Hiring your car out to others
  • Plumbing, electrical, building, cleaning, repairs or maintenance work
  • Mobile mechanic or car grooming work
  • Real estate agent services
  • Sales work or debt collection

Even when you’re just using your car to carry or tow things related to your business – such as equipment, machinery or samples – you may not be covered by your private car insurance policy. One common exception is for farming businesses.

If you claim business use of your private vehicle for tax purposes, you should definitely talk to your insurer about the need for commercial car insurance. To calculate the percentage of business use for Inland Revenue, you probably had to keep a log book for three months every three years. This provides a handy record of your typical business-related trips.

Other uses excluded from private car insurance cover

This article is only about business use that isn’t covered by personal car insurance. But it’s important to realise there are many other non-business related uses that won’t be covered. These typically include things like off-road driving, track racing, time trials and rally driving. Even driving in a protest may be excluded.

Always read the policy’s exclusions carefully. Also, make sure you’re aware of other times when you’re not covered, like when driving under the influence of drugs or alcohol, or not complying with the conditions of your driver licence.

Check out a range of insurers

Different insurers draw the line between private and commercial vehicle insurance in different places. That’s why it pays to shop around to get the cover you need for the best price.

If you work from a home office, and occasionally drive your car to meet a client, it probably won’t count as commercial use. Nor would popping down to the local stationery shop to pick up some pens, paper or printer ink for your home office business.

The most important thing is to be honest and thorough when looking for the right policy and answering questions from the insurer you choose. There’s no point in paying insurance premiums only to find out you don’t have the cover you think you have.

Next steps

Ask friends and family about their car insurance experiences and consider talking to a financial adviser or insurance broker.

To learn more, see our complete guide to car insurance.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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