It’s been repeatedly stressed that anyone on the road needs auto insurance. People are always going to use their cars, so naturally, they always want to be covered. In the event of an accident, you’ll never want to pay out of pocket for the damages done to a vehicle or injuries sustained by another driver. Drivers are typically covered by 1 of 2 policy types when on the road. Each one strictly depends on what they use their vehicle for. This is where the comparison between a commercial car insurance policy and a personal auto insurance policy comes into play.
Ask yourself what you are using your car for. It may be a personal vehicle used to commute to work. Later in the year, you may plan a road trip. Or, maybe it’s a collectible car that remains in a garage most of the time. A personal auto policy would cover this type of car usage. Collision and comprehensive coverage can be added to the existing liability coverage. Personal auto insurance will cover you in any case of damage or injury as long as the car is being used personally and for personal purposes.
So, where does the personal use become impersonal? The moment you begin using your vehicle for business purposes or work-related purposes. When you’re on the work clock and driving, you’re no longer covered by your personal insurance. Instead, you would need to have commercial auto insurance. This isn’t the only case where commercial auto insurance coverage would be required. There’s plenty of differences between commercial auto policies and personal insurance. Knowing these differences and when to buy the right coverage is what InsuranceNavy is here to help with.
What does personal auto insurance entail?
The personal use of a vehicle isn’t as broad as commercial use. The first thing about a personal 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 usage of the vehicle must only be for personal reasons.
We’ve already mentioned some of the obvious ones, but one particular case worth mentioning is driving your car to and from work. While commuting to work, you’re not on the clock yet and how you get to work is a personal endeavor. When you start using your car for work purposes, your personal insurance will no longer cover it.
If you’re a sole proprietor, you might simply require personal auto insurance.
What does commercial auto insurance entail?
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.
Some cases where a driver would need commercial insurance would be:
- 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 all your supplies and equipment to your worksite or between different job sites. Once the car starts, the work clock begins, so it’s not a matter of personal coverage. Additionally, there are also add-ons to cover the work equipment you keep in your vehicle.
- Driving for business reasons - Say that you’re a real estate agent and you have to drive clients to a property. Or, maybe 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 business auto insurance.
- The company owns/leases the car - If you run a business where you own or lease 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 exactly does commercial insurance cover?
Commercial auto insurance gives you more bang for your buck by covering yourself, employees, and any business assets kept in your vehicles.
In addition to that, commercial policies cover:
- Injury and liability - Injuries and damage done to other drivers in an accident are naturally covered. Liability insurance, including both bodily injury liability 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 coverage by insuring you for any medical or injury costs coming your way after an accident.
- Property damages - Property damage liability is another insurance requirement that most states have. If you were to damage public or private property, you would be covered. In addition, any damage done to your work vehicle would also be covered by your insurance company.
- Comprehensive coverage - With a personal policy, comprehensive insurance is usually bought as an add-on coverage. With a commercial policy, comprehensive coverage against acts of theft, vandalism, and weather damage is included for the company vehicle.
How much does commercial insurance cost in comparison to personal insurance?
A study this year 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 both collision and comprehensive coverage along with uninsured motorist protection.
Commercial insurance includes all these policies, but not at a low cost. In fact, 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 rounds up to an annual premium of $1,200 to $2,000 on average. Said liability limits range from $300,000 to $1,000,000 with a minimum premium of $500. Essentially, 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 may be able to 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 and commercial insurance so important?
While they differ in coverage, being personally and commercially insured is both a legal and financial responsibility. Having commercial insurance when you use a personal vehicle for work provides protection from any gaps in coverage that can negatively affect your premiums. If you’re a business owner who relies on drivers and their services, then you’ll want all your employees and vehicles to be covered. The first step is contacting your insurance agent and asking if commercial coverage is right for you.