Do you need a commercial or business auto insurance policy, or is your personal car insurance sufficient? Sometimes the answer is clear–other times, it’s a little murky.
You may think a personal policy is good enough for your business, but having insufficient coverage could result in financial ruin for your company if you or an employee get into an accident and your company faces a lawsuit.
Working through the questions below will help you determine what kind of auto insurance policy is appropriate for your situation.
1. Do you drive back and forth to work?
If you answered yes and this is the only reason you’re wondering whether or not you need a commercial car insurance policy, the answer is simple: You don’t. A personal auto policy will cover your commute. A commute is expected by car insurance companies and is part of typical driving.
Sometimes you’ll pay a higher fee because of a longer commute simply because you’re on the road for more miles and there’s higher risk involved. The insurance company will protect their risk by charging a higher premium. Regardless of whether your commute contributes to higher premiums, commutes are covered by personal auto insurance policies.
Should you be involved in an accident on your commute, the other party will not be able to sue your business or your place of employment. You are liable during your commute and your personal insurance policy is sufficient. There is no need for business auto insurance in this case.
2. Do you transport others for a fee?
If you’re giving rides for hire, you are using your vehicle for your work. You may not need a commercial policy per se, but you will definitely need a rideshare endorsement.
If you’re driving for one of the major carpool services such as Uber or Lyft, they will provide car insurance coverage during certain periods (basically, while you’re on the clock).
If you get into an accident while you’re carrying a passenger, Uber/Lyft’s commercial insurance will cover your liability and first-party (your own) damages.
The problem with company-provided policies is that they leave gaps. Uber's and Lyft’s policies are secondary, which means you will have to make a claim with your insurance company first. If they deny your claim, insurance through Uber and Lyft will kick in. Sounds good, right? Not quite. If they deny your claim because you were driving commercially, that means they could drop you as a client because you broke the personal auto policy contract.
Many of the large personal auto insurers also offer a rideshare endorsement to cover the gaps. It will cost more than a personal policy but should cost less than a commercial policy.
Call your personal insurance company and see if they offer such coverage. If not, you’ll need to search what’s available in your state and switch companies. Gaps in coverage are bad news for consumers.
3. Do you run errands for your boss?
If the primary use of your vehicle is for business, then yes, you need a commercial policy. If you only run errands occasionally, you can probably get away without it.
Your personal policy will provide you with coverage even if you’re driving for business purposes, as long as it’s just occasionally. The problem is that if you cause an accident while driving for business, your personal policy will only protect you. The other party could also sue your business.
It’s in the best interest of your employer to carry commercial coverage to protect their assets.
Often, your employer has you covered under their policy when you’re driving your vehicle as part of your job, but don’t count on it. Miscommunication and assumptions are not going to account for coverage. Your car insurance company will not say, “Oh, you thought you were covered? OK, in that case, you’re covered.”
If your employer is not covering you for driving your personal vehicle for work purposes, and you’re doing a lot of work-related driving, you should probably look into another job. If you’re committed to sticking with the job you have, request that your employer cover your work-related driving with a commercial policy.
4. Do you transport goods for your job?
If you do, you need a commercial policy. The reasons are similar to those mentioned earlier regarding running errands for your boss. Any time you cause an accident while driving for work, your business can be held liable in court.
In addition, the job-related goods are probably of great value and your personal policy won’t provide any protection for those items.
5. Do you hire others and allow them to use your vehicle to do their Job?
If you answered yes, then, yes, you need a commercial policy. A personal policy will cover some business-related driving, but it will only protect you and your employee personally. It will not protect your business.
Any time you’re paying someone to drive a vehicle, and you don’t have a commercial policy, consider the repercussions if another party is seriously injured and sues your company. Your business will not be covered and it could destroy it.
It’s important that you budget for adequate insurance to protect your company from vehicle accident-related lawsuits by purchasing business auto insurance.
6. Are you self-employed and using your vehicle for work?
Outside of commuting to a place of work, if you’re using your vehicle for any other work-related activities, you need a commercial policy. Once again, you need to consider protecting your business assets. Insurance is all about protection. If you have a small business, being sued after just one major accident could run you into bankruptcy.
You carry business insurance to protect other dimensions of your companies’ finances. Similarly, you need a commercial policy for auto insurance if you use your vehicle for work to protect from any road-related liability.
7. Is your business policy adequate for car-related lawsuit protection?
This is a great question. Umbrella coverage offers an umbrella of protection for your business. You’d think it would also protect your company from post-vehicular accident lawsuits.
An umbrella policy will protect you from accident lawsuits but only if you have a commercial auto policy listed under the umbrella. The bottom line is that you still need a commercial auto policy.
8. Is your vehicle owned by your company?
If your vehicle is owned by your company, then you need commercial coverage. Think about it. Your vehicle is owned by the business, so you need a business auto insurance policy for it. A personal policy would not apply.
You wouldn’t get a motorcycle policy for a passenger car. It wouldn’t make sense because it’s clearly not appropriate coverage. A personal policy is an inappropriate coverage for a business vehicle.
9. What kind of vehicle do you drive?
If you drive a semi-truck or a cargo van, check the laws in your state. Chances are you’ll need a commercial policy for that vehicle. It will be easy to figure out if you do. If you try to get a personal policy for a vehicle that requires a commercial policy, your insurance company will flat out tell you what you need. They’ll make sure they’re following the law, and as a result, you won’t have to wonder.
If you feel like you fall into a gray area and you’re not sure if a commercial policy is what you need, or if you’ll be ok to stick with a personal policy, communicate with your insurance company. As we’ve said, hoping for the best does not equal adequate coverage. You need to know that you’re protected.
Fortunately, even though business car insurance costs more than a personal policy, your premiums are tax-deductible. That fact makes it a little bit easier to make the payments.
Hopefully, you’ll never need to file a claim, but if you do, you’ll realize that the extra cost of commercial auto insurance is worth it because of how it protects your business’s financial interests.
Melanie Musson is an insurance expert and writer for CarInsuranceComparison.com. When she’s not studying insurance, she loves to spend time camping with her family in the Rocky Mountains where they live.