Jasmine Birtles
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When Should I Get Personal Auto Insurance Versus Commercial Auto Insurance?
Reading Time: 6 minutesInsuring your vehicle is an important matter. You need to consider where to insure your vehicle, what options to choose, and what type of insurance to get. Very often, auto owners have their doubts about whether they should get personal or commercial auto insurance.
This decision should be based on many factors that we’ll describe below. If you want to learn the difference between the two and find out what the best option for you is, keep reading this article.
- The Difference Between Personal And Commercial Auto Insurance
- Which Option Is Better If You Use Your Car To Do Business
- An Overview of Commercial Auto Insurance
- An Overview Of Personal Auto Insurance
The difference between personal and commercial auto insurance
If you own a small business, the line between personal and commercial for your car can be a bit blurry. Some business owners today, as well as their employees, use personal vehicles to do business. As a matter of fact, even 76% of Americans use their personal car to get to and from work today.
Some of them get a tax reimbursement or their travel costs are covered in the benefits package at work. Regardless, we can say with certainty that the majority of people in the world use their own vehicle to commute to work.
If you decide to use your vehicle to transport goods for business and do other errands that are part of your job, you should be aware that a personal insurance policy will exclude this type of use. So, if you get into an accident while driving for work purposes (your commute is an exception), you are not covered.
Commercial auto issuance covers business-related liabilities. Both personal and commercial insurance cover accidents, but commercial insurance usually covers higher claims.
There are also differences in terms of the type of vehicle you can insure with personal and commercial insurance. You can insure commercial pickup trucks, dump trucks, and some semi-trucks only commercially, while you can decide to insure your car with personal insurance, even if you use it for work.
On top of this, there’s a big difference in terms of cost and documentation. Commercial insurance is costlier and requires more documents to be completed.
Which option is better if you use your car to do business?
Truth be told, if you use your car for work, the obviously safer and more inclusive insurance option is commercial. This doesn’t have to cost you a fortune, though. With the right insurance provider and a company that can help you choose the features in the program, this can be a great bargain.
If you are looking for good commercial auto insurance with an affordable quote and quality service, check out CoverWallet commercial auto insurance and their policies. According to this popular service, this type of insurance is a very good idea if your business:
- Delivers good with the vehicle in question
- Transports people from one place to another
- Is used to plow or tow
- Transports business equipment
- Transports hazardous materials
Naturally, if you don’t use your car at all for business, you don’t need commercial insurance. This applies if you have a business vehicle to get to and from work and handle work tasks, or if you use another form of transport for your job.
You can get all sorts of insurance policies and features as part of a personal package, or even opt for pay-per-mile car insurance if you are not driving your car often. eCommerce development services can build an informative website to update customers about these packages and policies.
Still not sure what you need? Let’s delve into more details about these two forms of insurance.
An overview of commercial auto insurance
Think of it this way – the main factor that differentiates between commercial and personal insurance is who owns the vehicle. If the vehicle is owned by a business, your option for insurance is obvious – you must get commercial auto insurance.
Commercial auto policies pay for bodily injuries, property damage in auto accidents, and legal expenses. They also cover higher claims, complex legal issues, and a more diverse set of vehicles.
This type of insurance includes the employees as additional insureds. That way, every employee that has a valid license and is hired at a company can drive the same company vehicle.
There are plenty of things that affect the insurance cost starting from driving records to the type of business, to the policy’s deductible and coverage limits.
If you use your vehicle primarily for business and have bought it with your company, the option for insurance is obvious – you’ll need commercial insurance. However, if you own the vehicle personally, you can choose whether you want personal or commercial insurance as long as your vehicle can be covered with both types. Keep in mind that trucks and similar vehicles can only be insured commercially.
The higher liability limits covered with commercial insurance, but not with personal insurance include, but are not limited to vehicles that:
- Transport equipment and goods for business
- Drive employees or clients
- Tow trailers used for business
- Haul work-related, heavy loads
- Charge people to transport goods from and to a location
- Charge people a fee to ride in the vehicle
- Perform some kind of a paid service with the vehicle
One of the main questions of drivers is whether commercial auto insurance also covers personal use? In most cases, this type of insurance covers the employees that have permission to drive the vehicle. This covers personal costs like health insurance in case of accidents, etc.
An overview of personal auto insurance
Personal auto insurance will cover accidents that happen with the vehicle, but only when it is used for personal use. This also includes the commute to and from work in addition to any forms of travel that are unrelated to the job duties of the driver.
Personal insurances typically insure the owner and one or two family members in the vehicle. However, the majority of personal auto policies are very strict about excluding business use. So, if you get into an accident while doing work errands with your car, the insurance company will reject your claims if you get into an accident.
Some personal auto insurance policies include coverage for business use, but this is often very limited. Such policies cost almost as much as commercial policies, so not many people opt for them.
Still, if you are looking to save money on car insurance but want it to cover some of your business use, you should ask the policy provider what exactly you get with the personal auto insurance.
According to Phi Dang, CEO of Sidepost, “The only reason why personal car insurance doesn’t cover business use is that companies view business drivers as riskier than personal drivers.”
How the two types cross over
Sometimes, commercial and private insurance policies can cross over, which is why people have doubts about which one to choose.
Let’s consider some examples.
A tow truck operator has a flatbed truck in his name that he uses to transport other vehicles. He also drives the truck to do shopping or take his daughter to school. Now, the vast percentage of the use of this vehicle is for business purposes, but the driver also uses it for personal purposes on occasion.
The driver has two options – personal or commercial. Which one will he choose is up to him. However, if he gets into an accident while transporting vehicles, the personal insurance won’t cover it.
Let’s consider another example.
There’s a florist with a personally owned pickup truck. The woman parks it in her home garage and uses it every day to drive her kids to school, do shopping, and commute to the shop where she works. Her husband and children sometimes drive it too with permission.
On occasion, when the florist has big orders, she uses the pickup truck to run work errands. These account for a minimal mileage i.e. happen very rarely.
This driver also has two options – personal or commercial. But, since she’s rarely using the vehicle for business purposes, she’s hesitant about paying a higher quote and going through all the legalities that come with commercial insurance.
In the end, it all comes down to the auto owner’s choice. However, in the first case, it is smarter to opt for commercial insurance because the risk is much higher.
Which one is right for you?
We created a short list of questions that can help you make this decision:
- Who owns the vehicle? If you own it, you can choose between the two based on how often you use it for work. If it’s business-owned, the solution is evident – you must have commercial insurance.
- What is it used for? This is very important. If you use it solely for business or mostly for business purposes, commercial insurance is the obvious choice. If you use it for personal purposes, you should opt for personal insurance. If you use it for both, it is up to you to make the choice.
- What’s your budget? Commercial insurance is much costlier than personal because of the numerous things it covers. If you can choose between the two, your budget can also be a factor in your decision.
- What kind of vehicle are you insuring? Personal insurance doesn’t cover some types of vehicles that are made and used for business purposes. If you have a towing truck, for example, it might not be eligible for personal insurance.
Hopefully, we helped you make your choice! If you still can’t decide, the best person to help you make this decision is an independent agent that will describe the policies to you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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