It can be confusing determining if you need a personal auto policy or a commercial (business) auto policy. As a business owner, you need some of the same insurance coverages for the cars, trucks, vans, or other vehicles you use in your business as you do with your personal vehicles. But there are important differences between the two types of policies. The best way to determine what type of policy you need is to discuss your needs and usage with your Agent.
Some questions to consider are:
How do I know when I should have a commercial auto policy?
The definition of “commercial use” varies by company. You probably need a commercial auto insurance policy if:
- The vehicle is registered in the business name
- You have a trailer or permanently attached equipment
- You have a commercial license plate
- Employees operate the vehicle(s)
- Employees are transported in vehicle(s)
- Excessive vehicle size and weight
- Excessive towing trailers and/or equipment
What types of businesses require a commercial auto policy?
All businesses that own or use a vehicle in the course of their operations should have a commercial auto policy. Even businesses without use or ownership should have hired and non-owned auto liability to protect the business entity from liability of others operating vehicles on the businesses behalf.
Some of the most-common professions that require commercial auto policies include:
- Taxi/cab services
- Trucking/hauling services
- Moving companies
- Delivery services
- Limo services
- Food trucks
- Auto repair/detailing
- Car rental services
- Home car wash businesses
- Repair services
- Locksmith services
- Real estate
- Day care or church van services
- Beach services
Does my personal auto policy cover me for business-specific issues?
Coverages always vary and you should consult your policy paperwork and ask your Agent if you have specific questions. Business use is generally excluded from coverage under a personal policy, however, a personal auto policy may provide coverage for some business use of your vehicle. Similarly, your employee’s personal auto policies may cover some business use of their vehicles too, but a personal auto policy is unlikely to provide coverage if the vehicle in question is used primarily for business. It will not provide coverage for any vehicle owned by a business, nor will it protect the business entity itself or defend the business in any lawsuit that could be brought. The personal auto policy, whether yours or your employee’s also may not have enough limits to protect your business.
Do the passengers or contents in my vehicle matter?
Historically, personal auto policies exclude coverage when persons or property are being transported for a fee. You need some type of commercial policy or endorsement if you work for Uber or Lyft even part-time.
Recent events, such as the world-wide Coronavirus Pandemic, have forced slight leniencies for auto insurance companies when workers, especially in the restaurant and hospitality industry were forced to rely solely on take-out service. Even in unprecedented situations like this, it’s important to talk to your Agent to be sure that you’re covered no matter how you’re using your vehicle because a denied claim will only add to the stresses and financial hardships.
What kind of liability limits do I need?
As a business owner, you need higher liability limits to meet contractual needs as well as to better protect the business that you’ve built. Generally speaking, a commercial auto policy can offer higher liability limits than a personal auto policy.
Some worry that switching to a commercial auto policy will be vastly more expensive than a personal auto policy but that is not always the case. You want to be sure that you and your business is protected properly and that the payments you are making are not for coverage that could potentially deny your claim.
What about registration, certifications or filings?
If you are required to have certain documentation like certificates of insurance or filings for trucking it is generally a good indicator that you need a commercial auto policy.
Who your vehicle is registered to is another good indicator of the type of policy that you need. In a personal auto policy, the named insured is an individual whereas if the named insured is the business, a commercial auto policy is required in order to properly protect the business as well as the vehicle operators in the event of a loss.
If a business is added to the personal auto policy as an “additional interest,” this serves only to include its interest in the physical damage of the insured vehicle and does not bind the insurance company to protect the business in the event the business is named in a lawsuit involving the vehicle.
The bottom line:
It is not a good idea to seek an exception or try to have a personal auto policy respond like a commercial auto policy. Remember, if you operate your business in any fashion other than a sole proprietor and sole owner, a personal auto policy will not protect the business entity or defend the business entity in any lawsuit.