This article has been reviewed by licensed insurance industry expert, Moshe Fishman.
Do you ever use your car for business purposes? Are you a small business owner who occasionally asks employees to use their personal cars for business purposes? If so, you may need commercial auto insurance. That’s because a personal car insurance policy doesn’t cover the use of a personal vehicle for the transportation of goods or business ventures.
But what exactly is considered “business use” and “personal use?” The difference between personal use and business use can be tricky to define, even when consulting the definitions provided by car insurance companies.
In a nutshell, vehicles used for any business purposes will need to be covered under a commercial auto policy. In addition, if you ask your employees to drive for business purposes, you need commercial auto insurance. So, this means company cars and family cars used for business purposes.
Take a look at these scenarios illustrating the differences between personal versus commercial uses and the appropriate category of insurance coverage:
|Personal Auto Insurance
|Commercial Auto Insurance
|Picking up morning coffee for co-workers.
|Delivering coffee to customers as a food delivery driver.
|Driving friends to a party or a camping trip.
|Transporting clients to work-related events or log high mileage driving to job sites.
|Picking up a friend at the airport.
|Picking up clients at the airport.
|Driving to the construction site where you work.
|Hauling equipment to a construction site for your company.
Once you determine the extent of use of a vehicle for business purposes, it’s important to provide the insurance policy with the right type of coverages.
Commercial auto insurance is like personal auto insurance in that it covers liability, comprehensive, collision, and uninsured motorists. Usually, the premium is more expensive, and the coverage limits are higher. This is because vehicles are used more frequently and are thus more likely to be involved in costly accidents.
There are additional types of commercial auto coverage that are included with commercial auto insurance that are generally not available with personal auto coverage. Here are some of these additional coverages.
Generally, commercial auto insurance doesn’t cover tools or equipment being carried or transported by the vehicle; these would be covered under a business owner’s policy. A homeowner’s or renter’s insurance policy would cover personal belongings in the vehicle.
No. Commercial auto insurance does not apply to business owners and contract employees who work for ridesharing companies. Rideshare insurance is required for drivers who work for companies such as Uber and Lyft.
Premiums vary from company to company so it’s best to shop around to ensure you or your company are getting the best price. Commercial auto insurance is guaranteed to be costlier than personal auto insurance. Coverage limits tend to have a minimum of $500,000 and can be more than $1 million.
Insurance carriers use several factors to determine their rates. These are the main factors that influence the price of a commercial auto insurance premium:
If you work for a company and use your personal vehicle occasionally for work, a personal policy with the right coverages may meet your needs. When getting a quote for a personal insurance policy, be sure to mention that your car is being used occasionally for business.
If you change employers and this becomes a requirement for your job, you should let your current insurance company know. Not letting your insurer know may result in not being covered for any work-related accidents, even if you use your vehicle for work infrequently.
When it comes to commercial auto insurance, it’s better to be covered than be sorry when the unexpected happens. Check with your insurance company to see what type of policy is right for you.