We recommend that our One sure client read through these resent comments made by the Ombudsman for Short-term insurance. For ease of reading we have summarized it.
During the sale of a motor insurance policy, an insurer will usually ask a prospective client what the intended use of the vehicle is.
This question is asked in order to ascertain whether the client intends to use the vehicle for private, business or commercial purposes so as to determine the correct risk profile of the client and to calculate the correct corresponding premium. Understanding the distinction between the various usages is important because if an insurable incident occurs at a time when the vehicle is not being used in accordance with the specified usage, the insurer may reject the claim. Many consumers provide incorrect information to their insurer in response to this question because they do not understand what is meant by private, business and commercial use.
Private use of a vehicle refers to use only for private and social purposes. In most instances this includes driving to and from the insured’s regular place of employment, but does not include any other form of business travel. This means that a vehicle will not be covered
Business use refers to the use of a vehicle as part of an insured’s work function. This is, for example, when an insured has to travel to clients or attend meetings outside of his or her primary place of employment. A vehicle that is insured for business use will also be covered for private use.
Commercial use covers vehicles used to generate an income. Examples of commercial use include the use of a vehicle to carry goods for business purposes, to carry fare-paying passengers or for trade purposes.
It is important for consumers to understand the differences between personal, business and commercial use. If the incorrect description of the vehicle’s use is given to the insurer it may result in the rejection of a claim.