If you’re using your vehicle for more than personal use, you need more than personal insurance. But figuring out which type of enhanced policy to get can be confusing. Insurance companies may offer business or commercial auto insurance, so you need to understand the distinction between the two types of insurance.
We’ll help provide clarity by explaining the difference between business commercial auto insurance and business auto insurance and providing examples for each. We’ll also share how to go about finding the most affordable rate.
Why is auto insurance necessary?
The biggest reason for auto insurance is to protect drivers involved in an accident when it wasn’t their fault. Also, having auto insurance is required in almost every US state.
It is illegal to drive auto insurance and it is required for vehicle registration in most states. If you are leasing or financing your vehicle, the lender may also require you to have sufficient auto insurance.
Each state has minimum liability insurance requirements, although that will not cover damages to your vehicle. You may need more coverage than the minimum state requirement to cover the costs of repairing or replacing your vehicle.
Car insurance also offers financial protection. It will protect your passengers and yourself if you have medical expenses after an accident. Uninsured motorist coverage will protect you if you are involved in an accident and the driver that caused the accident doesn’t have auto insurance.
Do I need commercial or business auto insurance?
Commercial and business auto insurance protects vehicles when driven on the clock. It is needed for vehicles that are owned by a company or business. These types of insurance will cover multiple drives assigned to the same company vehicle.
You or your business will need commercial or business auto insurance If you are being paid for transporting people or goods, transporting items or equipment, or traveling many miles. Having the wrong insurance can result in expensive litigation in the event of an accident.
There are slight differences between commercial and business auto insurance. It’s important to work with an insurance agent to understand the difference and the option needed for your auto insurance coverage.
Liability auto insurance only covers the other parties when an employee is at-fault for an accident. Full coverage gives you comprehensive and collision coverage that will repair or replace your vehicle in an at-fault accident. It’s important to make sure you have sufficient coverage for your business or commercial vehicles.
It is not advisable to skip or skimp on commercial or business auto insurance because there are financial and legal implications. This type of insurance is customizable and can provide higher limits for employee and liability coverage. Many of the major top insurance companies offer commercial auto insurance.
What are the differences between commercial and business auto insurance?
Business use means using a vehicle for company operations or for running the business. A physical therapist traveling to a patient’s home to provide therapy services would benefit from business auto insurance coverage.
Commercial use means transporting people, goods, or equipment to a job location. It provides coverage for the products and the people in the vehicle. Commercial auto insurance can be used for small businesses and large businesses with a fleet of vehicles.
Commercial auto insurance is needed for large commercial vehicles, such as an 18-wheeler that delivers food to different restaurants. A delivery driver for a restaurant would also need commercial auto insurance. Rideshare drivers must typically purchase rideshare insurance or add it to their personal policy as instructed by the company for whom they work.
Commercial auto insurance may also be extended for personal use if the employee has permission to drive the business vehicle. It can cover the accident costs if an employee drives a company vehicle for personal use.
If your business has multiple drivers of company vehicles, you should make sure your specific insurance policy covers this. Some insurance policies may cover all drivers, while some policies may be needed for specific drivers.
Cost of Commercial Auto Insurance
Commercial vehicles pose a greater insurance risk than business vehicles, which means it is also typically more expensive than business or personal auto insurance. This is because of higher coverage limits, more frequent vehicle use, specialized vehicle use, and more distance traveled in commercial vehicles.
Policies that just meet the minimum state requirements for liability insurance coverage will be cheaper than policies that include comprehensive and collision coverage. A higher deductible will also mean lower commercial auto insurance rates.
You can work with an insurance agent or compare quotes online to find the best options for your business. The following are considerations for the cost of commercial auto insurance:
- Type of vehicle
- Driving distance
- Driver’s gender
- Driving record
- Driver’s age
- Driving location
Can I use personal auto insurance to run a business?
It’s important to understand when you will be covered by personal auto insurance. Personal auto insurance will only cover accidents while driving your vehicle for personal reasons, not for business reasons. Most personal auto insurance policies exclude business use.
Your insurance company may reject the claim if you are in an accident while driving for business. If you are driving your personal vehicle for business or company operations, you should make sure the business or company owner has the proper coverage in case of an accident.
Personal insurance will cover any accidents or damages if you are driving a personal vehicle while commuting from home to your business. If you are driving colleagues to lunch or giving friends a ride on a night out, your personal auto insurance policy is sufficient.
What about hired and non-owned coverage?
Businesses may also consider employers’ non-owned car liability coverage (ENOL). It is also sometimes called hired and non-owned auto insurance (HNOA).
This is a type of liability insurance that helps cover damage to another’s vehicle, medical expenses, or legal expenses. It does not cover damages to the business’s vehicles or medical expenses for the employees because it’s only liability coverage.
ENOL will protect the business’s finances when employees are using personal vehicles for company or business use. This will provide coverage for the business when employees drive rented, leased, or borrowed vehicles for business purposes.
If you are unsure if you need commercial or business auto insurance, talk with your insurance agent to make sure you have the right coverage for your situation. It’s better to make sure you have adequate coverage before an accident occurs which leaves you with a financial burden due to a shortage of insurance coverage.
Melissa Morris writes and researches for the auto insurance comparison site, BuyAutoInsurance.com. She is a university professor and enjoys traveling and working out in her spare time.
