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When Do You Need Commercial Car Insurance?

Understanding the difference between commercial and personal car insurance can save you from the headache and expense of a lawsuit that could wipe out your entire business. The main differences between these two types of insurance are the extent and purpose of coverage. 

Personal car insurance is designed to protect individuals and extends to the insured's spouse and family members. Commercial truck and car insurance provides protection for vehicles used for business purposes against property damage and liability. 

According to the Insurance Information Institute, business owners need the same kinds of insurance coverages for the cars they use in business as they would for personal travel. This includes liability, collision and comprehensive, personal injury/medical payments, uninsured motorist coverage – and possibly more.

When to consider commercial car insurance

Determining whether or not commercial car insurance is a good fit for your situation isn’t always easy. There are times when personal car insurance may be enough. For starters, it’s important to know the exclusions, which vary depending on state laws as well as car insurance company guidelines. 

CHECK OUT: 5 Things Uber Drivers Should Know About Auto Insurance

For example, driving to and from your principal place of work is considered commuting and is covered under a standard personal auto policy. Similarly, if you are maintaining or using any vehicle to engage in farming or ranching, your personal car coverage may be just fine. However, using your vehicle for most all other business purposes is not covered under the liability policy of your personal car insurance plan. 

If any of the following situations apply to you then it's worth it to consider commercial car insurance:

  • Using vehicles for purposes that involve selling, repairing, parking, storing or servicing autos 
  • Using your car or truck to transport goods or people for a fee (such as a taxi driver or online transportation network companies like Uber)
  • Carrying equipment (ladders, supplies, tools, etc.), hazardous or flammable material, and/or housekeeping equipment for a business
  • Using your vehicle to conduct a service
  • Hauling a considerable weight in tools or equipment, or towing a trailer used to conduct your business
  • Allowing employees to operate the vehicle or if ownership is in the name of a corporation or partnership

If you are a small business owner and you need to add any of the following to your existing personal car policy, it might be wise to consider a commercial policy:

  • Coverage for a third party as an additional insured
  • Waiver of subrogation
  • Liability coverage for hired or non-owned vehicles
  • Liability coverage for mobile equipment

Who is covered under commercial car insurance?

The three categories of insureds are you, permissive users and omnibus insureds. “You” refers to the named insured, person or company listed in the declarations.

“Permissive users” refer to anyone else who is driving a covered auto you own, hire or borrow with your permission.

“Omnibus insureds” refers to anyone who is liable for your conduct or for the conduct of a permissive user.  Said differently, this is anyone who may be held legally responsible for an accident caused by “you” or a “permissive user.” 

What is not covered in commercial plans

Some of the common exclusions under liability coverage include:

  • Expected or intended injury (road rage is an example of this)
  • Contractual liability (liability assumed while under contract)
  • Workers' compensation
  • Employer liability (claims against the employer)
  • Fellow employee injuries

  Understand the types of commercial car insurance

Do not take a “one-size-fits-all” approach to assessing the appropriate type and coverage amount. Types of commercial auto insurance include:

  • Business auto insurance
  • Truck insurance
  • Cargo insurance
  • Pickup truck insurance
  • Tow truck insurance
  • Van insurance
  • Dump truck insurance
  • Non-owned/hired liability insurance

Most states require commercial vehicles to be covered by the same minimum insurance requirements that pertain to all registered vehicles (this includes liability insurance, and possibly the addition of uninsured motorist coverage as well as no-fault car insurance, depending on the state.)

Because each state has its own requirements for commercial coverage, it is best to consult the department of motor vehicles in your state. 

How to buy commercial car insurance

Depending on the nature of your business and how your vehicles are being used, rates will vary.  

Whether you decide to use an agent, a broker, or do research on your own, it is best to select a provider that offers the most affordable coverage that meets your needs. 

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