What’s the Difference between Commercial and Personal Auto insurance?
Commercial auto insurance and personal auto insurance are distinct products designed to cater to different needs and scenarios.
Personal auto insurance is intended primarily for individuals and their families, offering coverage for personal driving, such as commuting, running errands, or traveling. This insurance typically covers liability for bodily injury and property damage, personal injury protection, and sometimes coverage for damage to the insured vehicle.
In contrast, commercial auto insurance is designed for vehicles used for business purposes. It provides broader liability coverage because the risk is often higher in business operations. Commercial auto insurance also protects goods or tools carried in vehicles and employees who drive or are transported in these vehicles.
The distinction is crucial as personal auto insurance usually excludes coverage for business use, making commercial insurance essential for those who use vehicles for work-related purposes.
What is Commercial Auto Insurance?
Commercial auto insurance policy covers far more than personal insurance because risk tends to be higher when someone is working. Like personal insurance, commercial car insurance provides coverage for you if you become involved in an accident while driving. Legal, medical payments and damage costs are all covered by commercial auto policies. The vehicle can be one you own, but more often than not, the car you use for work is owned by your employer or company.
Commercial auto insurance covers the following:
- Transportation service - You may work for a transportation company specializing in goods or passengers. Whenever either one of those enters your vehicle, you’re officially on the work clock.
- Truck driving - All semi-trucks are commercial vehicles. The drivers typically don’t own the truck or the trailers attached to them. There are also add-on commercial auto policies that can cover trailers since they are part of the vehicle.
- Providing a service - Say you work for a contractor or landscape service. You’re driving a work vehicle loaded with supplies and equipment to your worksite or between job sites. Once the car starts, the work clock begins, so it’s not a matter of personal coverage. There are also add-ons to cover the work equipment you keep in your vehicle.
- Driving for business reasons - Say you’re a real estate agent and must go clients to a property. Or, you’re taking the company car on a trip on behalf of the company. That qualifies as traveling for business reasons and is covered by commercial auto insurance.
- The company owns/leases the car - If you run a business where you own or rent a fleet of company cars or business vehicles to carry out your services, you’ll have to invest your company in commercial auto coverage. Note that most policyholders of commercial coverage are business entities. In cases where the company doesn’t own the vehicles, they’ll have to take out a hired and non-owned policy.
What Does Commercial Auto Insurance Cover?
Commercial auto insurance gives you more bang for your buck by covering yourself, your employees, and any business assets in your vehicles.
In addition to that, commercial auto insurance policies cover:
- Injury and liability - Injuries and damage to other drivers in an accident are naturally covered. Liability insurance, including both bodily injury liability coverage and property damage liability, is required in most states, whether you’re driving personally or for work.
- Personal injury protection - Commercial insurance comes with collision insurance coverage, insuring you for any medical or injury costs coming your way after an accident.
- Property damages - Property damage liability is another insurance requirement most states have. You would be covered if you were to damage public or private property. In addition, any damage done to your work vehicle would also be covered by your insurance company.
- Comprehensive coverage - A personal policy usually buys comprehensive insurance as an add-on coverage. A commercial policy includes comprehensive coverage against acts of theft, vandalism, and weather damage for the company vehicle.
What is Personal Auto Insurance?
The personal use of a vehicle is narrower than commercial use. The first thing about a private vehicle is that you own it, and the title is in your name. Personal insurance applies to everything you own –from your car to your home. Outside of that, the vehicle must only be used for personal reasons.
We’ve already mentioned some of the obvious ones. However, one case worth mentioning is driving your car to and from work. While commuting to work, you still need to get on the clock, and how you get to work is a personal endeavor. When you start using your car for work, your personal insurance will no longer cover it.
You might require personal auto insurance if you’re a sole proprietor.
How much does commercial auto insurance cost vs. personal auto insurance?
This year’s study found that the national average personal car insurance cost is around $1,592. If you look at it from a monthly payment perspective, it’s around $133. This assumes that the policyholders have collision and comprehensive insurance coverage and uninsured motorist protection.
Commercial insurance includes all these policies but not at a low cost. Commercial insurance does cost more than personal. With the higher liability coverage limits, the average monthly cost of commercial insurance is $142. Prices as high as $160 have also been reported. This increases to an average annual premium of $1,200 to $2,000. Said liability limits range from $300,000 to $1,000,000 with a minimum premium of $500. It’s like buying an additional personal policy.
Your commercial rates depend on the type of policy, the type of vehicle, how many cars you are insuring, associated risk, driving history, and claim record. While finding commercial insurance that costs the same as personal coverage is difficult, there are some discounts you can qualify for if you’ve been in business for a certain number of years. A benefit of commercial insurance is tax deductibles given to people who use their vehicles for work.
Why is personal auto insurance and commercial auto insurance so important?
While they differ in coverage, being personally and commercially insured is a legal and financial responsibility. Commercial insurance protects against any gaps in coverage that can negatively affect your premiums when you use a personal vehicle for work.
Suppose you’re a business owner who relies on drivers and their services. In that case, you’ll want all your employees and vehicles covered. The first step is contacting your insurance agent and asking if commercial coverage suits you.
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