Does your personal auto insurance cover work-related driving? Small business car insurance may not be top of mind, until you or an employee hit a patch of ice and crunch. Depending on your policy, you may need extra protection to cover such mishaps. Here’s how you can tell whether you need commercial auto insurance.
Personal vs. Commercial Auto Insurance
Personal and commercial auto insurance both protect against similar issues: they cover damage to your vehicle, your medical bills after an accident, and your liability costs from driving, meaning if you hurt someone else or damage their property, the insurance company will reimburse the other person so they don’t take you to court.
The main difference is that personal auto insurance is meant for driving in your private life while commercial insurance covers work-related driving. Commercial insurance also typically offers a greater amount of coverage, especially on the liability side. For example, a personal auto policy might pay out $300,000 max for a car accident while a commercial policy could cover $500,000 or even millions in damages, according to the Insurance Information Institute.
Having higher coverage limits is important because a work-related car accident can be much more costly if you’re driving around employees, customers or valuable equipment, and especially if you’re in a more expensive commercial vehicle like a tow truck. In exchange for the higher coverage amounts, commercial car insurance is typically more expensive.
Why You’d Need Commercial Car Insurance
You don’t need a fleet of vehicles to justify taking out a commercial auto policy. Here are some scenarios when your personal coverage may not be enough:
- You deliver goods for your business: Personal auto policies specifically exclude covering accidents that happen during “livery,” the transport of goods for payment. For example, a caterer delivering food to a party would not be covered during that trip under a personal policy.
- Your business owns the vehicle: If your business owns or leases the commercial vehicle, a personal auto policy can’t cover it.
- You drive clients in your vehicle: If you drive clients and get into an accident, not only will you be liable for their medical bills, they could also sue your business. This is a scenario when the limits on personal coverage are likely to be low. The personal policy could also deny your claim if they determine you were driving clients around for pay.
- Your employees use your vehicle during work: If employees get hurt while driving your vehicle for work, they could come after you for damages. And this is another scenario where a personal auto policy could deny the claim.
- Your vehicle has business equipment installed: If you’ve permanently installed any sort of business equipment on your vehicle, the insurer could determine that it’s no longer a personal vehicle. For example, you’re a contractor and you’ve set up a toolbox and ladder rack on the cargo bed.
- The vehicle is heavier than a normal SUV or pickup truck: Personal auto policies do not cover heavy vehicles like tow trucks, semi-trucks and minibusses. These policies will not cover vehicles that weigh over five tons or vehicles that can haul a one-ton load.
Personal Car Insurance Coverage
With all these scenarios for commercial insurance in mind, there are times when your personal auto insurance could be all you need. If you drive lightly for your company, meaning you only commute and visit a couple job sites or clients a day, that might be enough. This assumes that you’re mainly driving by yourself and will not be transporting any valuable equipment or products for sale.
If your employees follow the same sort of commuting schedule, drive their own vehicles, and do not transport equipment or clients, their own personal auto insurance should also be enough.
Consult a Car Insurance Agent
If you do any sort of driving for your company, consider speaking with an insurance agent who specializes in small business car insurance. Let them know exactly how you drive during the week, the vehicles you and your business own, and whether you plan on expanding your vehicle fleet.
The agent can review your existing coverage to see if you need a commercial policy or if you can make things work with your current personal policy, perhaps by increasing the amount of coverage.
Car accidents are unpredictable, but you can plan ahead and protect both your small business and employees by setting up the right protection now.