Understanding the Differences Between a Commercial Auto Policy and a Personal Auto Policy

Understanding the Differences Between a Commercial Auto Policy and a Personal Auto Policy

May 06, 2021

Commercial Insurance

Unless you 're in Virginia or New Hampshire, it is illegal to operate a motor vehicle in the U.S. without some level of auto liability insurance coverage. However, choosing the right car insurance coverage is not always a straightforward process, especially if you use your personal car for work or business-related purposes. If you use your personal car in such a manner, you should understand the differences between commercial auto insurance and personal auto insurance. Read on for some more information on this topic.

What Is a Commercial Auto Policy?

According to the Government Employees Insurance Company (GEICO), a commercial auto policy is the insurance coverage that covers damage on business vehicles. In this case, business vehicles are any automotive used for business-related activities such as transporting goods or ferrying passengers for a fee. This means that it is prudent to consider your personal car a commercial motor vehicle if you use it to conduct business-related activities. As such, you may require a separate commercial auto policy on top of your personal auto coverage.

What Is a Personal Auto Policy?

Generally, your personal auto insurance policy provides coverage in case of damages on your personal vehicle, especially when you use it for activities unrelated to business. This means that if you get involved in an accident while driving to a corporate meeting in your personal car, your personal auto policy may not cover damages. Depending on your arrangement with your insurance provider, there may be some exceptions.

Differences Between Commercial and Personal Auto Policies

The basic factor that differentiates a commercial and personal auto insurance policy is the owner of the vehicle. More specifically, while commercial vehicle insurance covers all automobiles owned by the business, a personal auto policy provides coverage for the vehicles you own. Some of the other key differences include:
  • Inclusions €“ Your personal auto insurance basically covers you, your immediate family members, and your car in case of a car accident. If you have auto liability coverage, it will pay for any legal claims as well as medical costs of third-party victims of the crash. On the other hand, the commercial auto policy covers you, your employees, your business vehicles, and legal costs.
  • Size of premiums €“ Generally, commercial auto insurance premiums are higher than those of a personal auto policy. This is mainly due to a large number of inclusions, as well as the size of risks involved. To give you an idea, claims made on a commercial auto policy are usually high, says the National Association of Insurance Commissioners (NAIC).
  • Legal issues €“ In the event of a car accident, the auto insurance claim process is lengthy and the legal issues involved in commercial vehicles are many. This is unlike personal auto coverage, which may only take a few weeks or months for the insurance carrier to pay out the claim.
  • Type of vehicle €“ Although some vehicles are personal, your insurance provider may classify them as business vehicles, especially if they are built for business activities. For instance, if you own a dump truck, trailer, or SUV that weighs heavier than 15,000 pounds, a commercial auto policy is the most suitable coverage. Personal auto policy is more suitable for small vehicles such as a saloon car. Take note that if you carry passengers in your small car at a fee, you will require a commercial car insurance policy.

When Do You Need Commercial vs. Personal Auto Policy

While these two policies cover virtually the same things, there are situations in which one coverage may be more appropriate than the other. That said, purchase commercial auto insurance if you use your car for the following purposes:
  • Transporting goods and business equipment
  • Ferrying employees or clients
  • Transporting passengers for a fee
  • Courier services
  • As a means of transport for business-related trips
On the other hand, choose a personal car insurance policy if you use your vehicle for exclusively personal activities, which may include:
  • Driving to work
  • Visiting friends and family
  • Running errands unrelated to business
Take note that if you intend to use your personal car to run business errands, you should consider purchasing a hired and non-owned auto insurance policy. The same should apply if you intend to hire a car for a business trip or lease a business vehicle. While this policy will not cover damages to your car, it will pay for legal costs and other liability expenses that may result if you get involved in an accident.

Benefits of Auto Insurance Policy

In 2010 alone, car crashes cost the U.S. economy more than $75 billion, according to the CDC. This shows just how costly a crash can be and how big of a financial risk you or your business faces in the event of a car accident. Thankfully, the commercial auto insurance policy protects your business from lawsuits, medical expenses, and claims that may hurt your finances if you paid for the expenses out of pocket. Similarly, your personal auto policy pays for your medical costs, damages on your car, and any third-party liability costs. In other words, auto insurance coverage can get you a new vehicle or cover repairs on your damaged vehicle, keep your business running, and save you from serving a jail term. If you use your personal vehicle for work or business-related purposes, you should keep these differences between personal and commercial auto policies in mind. Do you have any questions when it comes to your auto insurance policy and repairing the scratch on it? Call the professionals at Kneller Insurance Agency today to get started on quality coverage you can count on.