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Commercial vs. Business & Personal Auto Insurance


If you use your car for any business driving, you need to understand the difference between commercial, business and personal auto insurance. Making an occasional trip to the store to pick up something for the office is not a big deal, but making regular deliveries and carrying business-related cargo could put you in a more vulnerable position when it comes to liability. Being involved in an accident while you are running a work errand could leave you open to a very expensive lesson in these different insurance types. It is far better to be prepared than to be surprised.

Commercial, Business, and Personal Policies Provide Similar Basic Coverage

The fundamental coverage for each type of policy is the same. You can purchase liability insurance to pay for damages caused to the other driver, personal injury protection to cover both parties and physical damage protection to cover damages to you or your car. The main difference between commercial, business and personal policies is that the personal policy is usually smaller than the others. Personal policies also tend to cover the car owner and anyone who has permission to drive the car, while commercial and business policies might stipulate who is covered and who is not covered.

Each Type of Use Must Be Covered Separately

The type of coverage you purchase needs to reflect the way the vehicle will be driven. If you only drive your car for personal trips to and from work with an occasional shopping excursion, a personal policy is exactly what you need. In fact, the only time you should worry about buying any other type of insurance policy is when you find yourself driving your car for work-related errands. If there is any chance that your trip could be considered work-related, your personal insurance policy might not cover any of the injuries or damages from an accident.

It is safer to either drive a company car or purchase a different kind of insurance for your car if you find yourself running work errands on a regular basis. A small business owner who doesn't have the right insurance policy could potentially wipe out the business if they are involved in a serious accident because they would not be able to rely on their personal insurance to cover any of the damages. Using the wrong insurance policy can also leave you vulnerable to lawsuits from anyone involved in the accident, which can lead to astronomical settlements that are more expensive than any commercial or business insurance policy.

How Business and Commercial Use Differ

Business and commercial insurance sound like the same thing, but there are some important differences. A business insurance policy covers vehicles used in regular traffic situations. Commercial car insurance is for specialized vehicles that perform specific tasks on the job, like cement trucks or tractor-trailers. Both insurance policies are owned by the business rather than the car owner, so the business is liable if the car is involved in an accident.

While both types of insurance are more expensive than personal insurance, commercial coverage tends to be more expensive than business coverage. A car that is driven by a courier or real estate agent is usually only in normal traffic situations. Commercial vehicles tend to be at a higher risk to sustain damage on the job because they are used more frequently than typical vehicles. Trucks on a construction site are constantly in danger of being damaged as well.

Buses and 18-wheelers are much larger than the other cars on the road, which increases their danger of being involved in an accident because they can't always maneuver out of a dangerous situation quickly. That increased risk of damage causes an increase in commercial insurance rates.

Meeting Local and State Regulations for Commercial Insurance

When you purchase insurance for a commercial vehicle, you need to make sure that the coverage meets all of the local and state regulations for the way you will be using the vehicle. Cargo vehicles have to carry specific kinds of insurance coverage if they transport good across state lines, for example.

Make sure you explain the vehicle's expected uses in detail to your insurance agent so that you are covered for everything you need. If you're purchasing a business or personal policy, there is less danger of missing a certain type of coverage because there are fewer regulations regarding passenger vehicles.

Business and Commercial Insurance Reflect High Mileage Expectations

Personal car insurance is less expensive than commercial or business insurance simply because a personal use vehicle is expected to be driven fewer miles. A commercial vehicle is usually on the road during the hours when a personal vehicle would be sitting in a parking garage or driveway. Most businesses operate longer than the traditional eight-hour workday, as well, which means their vehicles are being used during 10 to 12 hour shifts sometimes. Every extra mile that a car is on the road adds more risk that the car will be involved in an accident. Commercial and business policies are more expensive in general because the cars they cover experience risk more often than personal vehicles are.

How Each Type of Coverage Impacts Multiple Drivers

When your car is covered by a personal insurance policy and someone else drives it, that other driver is generally covered by your policy. Business and Commercial policies are more precise about who is covered when driving a work vehicle, however. Some business and commercial policies only cover specific employees who are named in the policies. Others will cover anyone who is employed by your company. If someone who is not covered is in an accident while driving a company vehicle, the company could be liable for any damages or injuries. It is important to talk to your insurance agent about who is on the policy and who is not on the policy so you don't find out the hard way.