Business Use vs. Commercial Auto Insurance

When it comes to insuring vehicles, the way they are used plays a major role in determining the right type of coverage. At 643 Insurance, we often get questions about whether a vehicle used for business purposes can stay on a personal auto policy or if it needs to be moved to a commercial auto insurance policy. Let’s break it down to help you understand the difference and make the best decision for your needs.

Business Use on a Personal Auto Insurance Policy

A personal auto policy can cover business use in certain circumstances, but it’s not a one-size-fits-all solution. Here are some common scenarios where business use might be allowed on a personal auto policy:

• Occasional Business Use: If you use your vehicle to attend meetings, run errands for your job, or make deliveries (not related to goods or services you sell), many personal auto policies allow this type of usage with a business-use designation.

• Self-Employed Individuals: If you’re self-employed and use your car to visit clients or transport small tools or equipment, you might qualify for a business-use endorsement.

• Light, Irregular Use: Personal policies often accommodate drivers who occasionally use their car for business purposes but still primarily use the vehicle for personal reasons, like commuting.

If your situation falls under these categories, your insurer may add a business-use endorsement to your personal auto policy to account for the added risk. However, this doesn’t cover all situations. In addition, if you have a vehicle listed on your personal auto policy and your vehicle and/or usage doesn’t qualify for a personal auto policy, you risk having claims denied and expose yourself and your business to the financial risks involved with any claims.

When You Need Commercial Auto Insurance

Some types of vehicle usage go beyond the scope of a personal auto policy and require commercial auto insurance. Here are some examples of when it’s time to upgrade:

• Vehicles Owned by a Business: If your vehicle is registered to your business or used exclusively for business purposes, you need commercial auto insurance.

• Regular Transportation of Goods or People for Pay: If you’re using your vehicle for ridesharing (like Uber or Lyft), delivery services (like DoorDash or Amazon), or transporting goods as part of a business, a commercial policy is necessary. Even if the company that you are driving for provides coverage, sometimes it is low limits that might not protect you.

• Heavy Equipment or Vehicles: If you use larger vehicles, such as box trucks, dump trucks, or cargo vans, commercial auto insurance is mandatory.

• Employees or Multiple Drivers: If your vehicle is used by employees or others associated with your business, commercial coverage protects against liability for all authorized users.

• Frequent, High-Risk Business Use: Regular trips for deliveries, towing, or jobs that increase the wear and tear on your vehicle typically require a commercial policy.

Key Differences Between Personal and Commercial Auto Policies

1. Coverage Limits: Commercial policies offer higher liability limits to account for the increased risks associated with business use.

2. Liability Scope: Commercial policies protect against claims that may arise from employees driving your vehicle or accidents while conducting business.

3. Custom Coverage Options: Commercial auto insurance can include specialized coverages, such as hired and non-owned auto liability or equipment coverage.

Choosing the Right Policy

To determine whether your vehicle needs a business-use endorsement or a commercial auto policy, it’s important to assess how the vehicle is used. At 643 Insurance, we’re here to help you make sense of the options and ensure your coverage fits your needs.

Final Thoughts

If you’re unsure about your current policy or have questions about whether your vehicle requires commercial auto insurance, contact us today. Our team will guide you through the process and ensure you have the protection you need.

Have any questions for us? At 643 Insurance, we’re here to help you understand your coverage options and ensure you have the protection you need. Contact us at 643 Insurance today for personalized advice on your auto insurance today!

Subscribe to our blog and get access to our previous content library!