If you own any type of business, you probably know that a Business Owner’s Policy (BOP) is an essential tool to have in your insurance arsenal. But it’s not the only kind of commercial insurance you need.
Your BOP doesn’t provide any coverage for vehicles, so you’ll need a separate policy if you want auto insurance. (Trust us, you do!)
You might have heard from other well-meaning business owners that your personal auto insurance will cover business use. In most cases, this isn’t true.
Let’s take a look at the difference between personal and commercial auto insurance.
What’s the Difference Between Personal and Commercial Auto Insurance?
At first glance, the distinction seems simple: one type of insurance is for personal cars and one for business vehicles. However, there are some big differences in how the two types of insurance work.
Personal Car Insurance
As you’d expect, personal car insurance is for your personal vehicle; it often won’t properly cover a car in a company name.
Your personal car insurance will cover claims that happened outside of work. They do cover your commute to work, but most policies won’t cover any accidents that happened while you were driving between job sites, for example.
Commercial Car Insurance
Because of the higher risk involved, commercial car insurance policies tend to have higher rates than a personal policy. On the upside, however, they also can have higher limits.
And speaking of limits, under a commercial policy, you will typically have a Combined Single Limit (CSL) rather than separate limits for bodily and property damage liability, as with a personal policy.
Where commercial car insurance really stands up against a personal policy is in the coverage. Your commercial policy will protect your business assets if an injured third-party sues your company (something your personal policy won’t do).
There are some areas where the difference between personal and commercial auto insurance gets a little less clear.
Here are a few examples from the “gray area” between commercial and personal car insurance.
Realtors who use their personal vehicles to take clients from house to house are usually fine with a personal auto insurance policy as long as the vehicle is classified under “Business Use.” This ensures you get the proper rating and coverage for your needs.
Pizza delivery drivers will almost never be covered under their personal auto insurance, as the business is considered to be very high-risk. (You’re more likely to hit a stop sign if you’re trying to deliver eight pizzas in 30 minutes or less!)
In some cases, the pizza company that employs them may offer Non-Owned Liability coverage, but this generally protects the business against lawsuits, NOT the employee! So if Kenny accidentally hits a pedestrian or clips a BMW while making a turn, he is still on the hook for his own legal fees and car repairs.
Ridesharing drivers have some coverage from the company they drive for (Uber and Lyft, usually), but they don’t provide unlimited coverage at all times. These companies have designated time periods which determine whether you are covered and, if so, what your limits are.
Uber and Lyft only provide coverage while you are logged into the app and working. But even then, this is “contingent” coverage, meaning they will only take over after your personal auto policy does its part.
As with all matters of insurance, there is no cut-and-dry formula for determining whether you have coverage. It’s best to have an upfront discussion with an independent insurance agent to determine the right level of coverage for you.
Do I Need Commercial Auto Insurance?
If you’re still wondering whether you need commercial auto insurance or not, here are some questions to help you decide:
Who owns the vehicle?
If your vehicle is registered under a business name, a personal car insurance policy likely will not cover it. You should look into getting a commercial insurance policy.
What type of vehicle is it?
If the vehicle is above a certain weight, you will not be able to put it on your personal insurance policy. Vehicles weighing more than five tons or that can haul more than a one-ton load require commercial insurance protection.
Who drives the vehicle?
If anybody will be driving the vehicle for work other than you (and, in some instances, one or two immediate family members), you will need commercial auto coverage.
What is the vehicle used for?
If you use the vehicle just for commuting between work and home, a personal car insurance policy should be enough. But if you regularly transport goods, equipment, or people as part of your work duties, a personal policy isn’t going to cut it.
What coverage limit do you need?
Personal auto insurance limits are fine for personal use, but when it comes to your business, the stakes are much higher.
A commercial auto insurance policy can provide more protection (both financial and situational) than a personal one.
Of course, the best way to determine the difference between personal and commercial auto insurance as it relates to you is to contact your insurance agent.
Every person, business, and situation is unique, and you will have different coverage limits, premiums, and risk levels than another company, even one in the same industry.
At Harry Levine Insurance, our goal is to get to know you. The more we know about your business and you as a business owner, the better we can work to build an insurance policy that’s right for you.