When you need a business auto policy, what’s the difference between personal and commercial policies, and other things to consider
Auto insurance isn’t just for your personal vehicle – companies need car insurance for the same reasons. Whether you need business car insurance or fleet car insurance, the need is the same – coverage for company cars.
There are more applications to business car insurance that may not be readily apparent. Indeed commercial car insurance may be ideal for just one person.
When to Cover Business Vehicles
The most important thing to understand about business car insurance is when you need it. If you’re an employee somewhere and use your car to drive to work, a standard personal auto insurance policy works just fine. You’re in the clear.
However, if you’re self-employed or you’re an independent contractor and use your car for business purposes, a personal policy doesn’t adequately cover you. In these cases a commercial policy is the way to go.
The main reason insurance companies make a distinction between personal and commercial auto insurance is because vehicles used for commercial purposes tend to be driven more than vehicles intended for personal use. In many cases, they’re driven a lot more.
Since they’re on the road more, insurance companies want to insure for the extra risk. Even many insurance agents who are self-employed have commercial policies on their own vehicles. Rest assured, experienced agents or brokers are familiar with business auto policies.
Differences Between Business and Personal Policies
On the surface there isn’t that much difference between a commercial auto policy and a personal auto policy. Both have liability limits, uninsured and underinsured coverage, medical payments coverage (unless you’re in a “no-fault” state), and optional collision and comprehensive coverage.
However there are some important differences between business auto insurance and personal auto insurance. For one, commercial insurance policies require a set list of drivers. Personal policies require this too, but they often provide coverage in an accident in which someone not on the policy is driving (this is called “non-owned” coverage).
Not so with commercial policies. You’re either on or you’re not. If you’re not, you’re not covered.
Commercial auto policies also tend to be a bit more on the no-frills side, offering fewer options than its personal counterparts. Commercial policies often offer higher deductibles for full coverage. While most personal auto insurance policies don’t offer comprehensive or collision deductibles over $1,000, deductibles of $5,000 or even higher may be available on commercial auto policies. Also, many commercial insurance policies will not take drivers under 25 or over 74 at all, regardless of driving history.
Other Items Related to Business Auto Insurance
Ironically, assuming they meet the minimum requirements, drivers on commercial policies tend to go through less underwriting than drivers on personal policies. This is despite the increased mileage associated with commercial autos. While there are differences between insurance companies, many insurers find that drivers on commercial polices tend to be safer overall then drivers on personal auto policies.
One final item related to your driver license: unless the insured vehicle has a gross vehicle weight (GVW) of more than 26,000 pounds or is designed to carry 16 or more passengers, a CDL or other type of commercial license isn’t usually needed for commercial insurance. Therefore if you need a commercial policy to cover a car or even a light delivery van or truck, your standard driver’s license will suffice.