One major concern with relying on personal auto insurance in such cases is that an accident may occur and a personal insurer may deny coverage. So how do you know whether or not you should switch to a commercial auto policy? That all depends on the type of vehicle, the purpose for which it is used, and who owns it. Let’s dive into some questions that can help you determine whether or not you need to update your policy.
What kind of vehicle is it?
When looking into personal and commercial auto insurance policies, it is important to consider the type of vehicle you're using. If your vehicle is used for any business-related purpose, then a commercial policy would be necessary to provide financial protection against potential liabilities. Certain commercial vehicles may not even qualify for a personal auto policy, such as a flatbed truck utilized in a towing business.
What business are you in?
Professional activities such as real estate, accounting, consulting, and clerical work may mean that personal auto insurance is enough to cover vehicles used for transportation. However, if your business frequently transports people, you should consider investing in a commercial policy for added protection. If you are a driver for Uber or Lyft, some insurance companies will provide a rideshare endorsement that you can include on your personal auto policy but you’ll want to consult with an agent on if it makes sense to endorse it or to switch to a commercial policy.
How is the vehicle registered and owned?
How you title your vehicle can sometimes determine the type of insurance required. The title document shows ownership of the car or truck. If your business is incorporated and the company owns the vehicle, a commercial auto policy would likely be the most suitable option since the corporate entity, rather than an individual, owns the vehicle. This is also true if the vehicle carries a commercial license plate.
Who drives the vehicle?
Whether you operate solo or have staff members who commute between customers or job sites, regularly providing vehicles for job-related purposes can qualify as commercial use, and a commercial auto policy may be necessary. Another key difference between commercial auto insurance and personal auto insurance is the level of coverage extended to family and household members. Personal auto policies typically provide wider coverage to family members in various situations. In contrast, commercial auto insurance may only cover family members while driving or riding in the insured vehicle. Therefore, determining the desired extent of coverage for family members beyond the use of the insured vehicle is crucial in deciding which policy type is suitable.
Common Coverages on a Commerical Auto Policy
A commercial auto policy can protect your business from potential risks when you or your employees use company vehicles for business purposes, including rented vehicles. Some policies may also cover employees using their personal vehicles for work, provided they have personal auto insurance for those vehicles.
Below are the primary coverages available through a commercial auto policy:
- Liability: Provides coverage for injuries sustained by other parties involved in an accident and any vehicle damage resulting from an accident where a driver representing your company is responsible.
- Physical Damage: Collision coverage applies to damage incurred by a company vehicle in an accident, while comprehensive coverage applies to damage from other sources such as theft or hail.
- Medical Payments: Certain states offer coverage that may include payment for necessary medical care resulting from a vehicle accident.
- Uninsured Motorist: When driving for business purposes, this coverage pays for vehicle damage or medical expenses resulting from an accident caused by an uninsured driver, whether by you or your employees.
- Hired and Non-Owned Auto: Hired auto coverage protects your business in the event that you or your employees are responsible for accidents while driving rented vehicles. Non-owned auto coverage protects your business when your employees cause an accident while driving their personal vehicles for work purposes.
Commercial insurance policies aim to offer coverage for the added risks that come with daily business operations. Due to the increased liability coverage, commercial insurance policies usually cost more than personal auto policies. The cost of coverage is determined by various factors, including the value and safety features of each vehicle, the type of vehicle (e.g., car vs commercial van), their usage and parking location, accident history, and the level of coverage purchased. Higher risk factors usually result in higher premiums.
If you are looking for more information about a commercial auto policy or have a unique situation, we recommend speaking with a licensed insurance professional to help you evaluate your next steps. Ensuring that you have adequate coverage can go a long way in safeguarding both your personal well-being and the success of your business. Don't leave your hard-earned achievements and efforts at risk - proactively take action to protect yourself and your company.
The contents of this article are for informational purposes only. You should not act or refrain from acting based on this information without first consulting a Goosehead licensed agent at firstname.lastname@example.org. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided "as is." Goosehead makes no representation that this content is error-free.