What you may not know about car insurance, is there are certain cases where a personal auto policy may not cover you. What you may need is a commercial auto policy to make sure you are fully covered. Where personal auto insurance ends and commercial auto insurance kicks in, isn’t always obvious.
This is where having a trusted insurance agent is so valuable.
In many ways, both auto policies are very similar. Each has set liability coverage limits (payments made out when you are at fault). There is coverage for medical payments which covers medical costs for people in your vehicle up to a stated limit. There’s also physical damage coverage.
While the coverages may be very similar, the different situations where coverage is provided or not are very important to note.
Personal Auto Policy
A personal auto policy covers your personal vehicles and any driver in your household as long as they are listed on the policy. A personal vehicle is used for the commute to and from work/school in addition to any pleasure use.
Insurance companies exclude commercial use from personal auto policies because often times commercial use results in more exposure to risk and potentially higher liability claims.
There are some exceptions to this exclusion in specific situations.
Commercial Auto Policy
A commercial auto policy more specifically covers vehicles for business use, whether it be delivery, hauling materials, or a variety of other tasks.
Along with having more vehicles/drivers than personal policies, commercial policies often have higher liability coverage limits to combat higher exposure.
Commercial auto policies also bring with them additional coverages called hired and non-owned coverage.
Adding hired and non-owned coverage to a commercial auto policy extends coverage to any vehicle used by the business, not owned by the business. This could cover rented vehicles as well as employee personal vehicles that are used to run errands FOR THE BUSINESS.
Personal errands during business hours are not covered by commercial insurance (would be covered by the personal policy).
There are three main factors in determining whether you need a personal or a commercial auto policy:
- Who owns and drives the vehicle
- How the vehicle is used
- The type and weight of the vehicle
Related Reading: Commercial Insurance Policies
Ownership of the Vehicle
If you own your vehicle and you (or your family) are the primary driver, then this would obviously fall under a personal auto policy.
If a business owns the vehicle you drive, then you will most likely need a commercial auto policy. Another method is to be listed on your business’ insurance policy to make sure you are properly covered.
How the Vehicle is Used
If you use the vehicle for business purposes, you will most likely need to be covered under a commercial auto policy.
A personal auto policy, as mentioned before, covers you during your commute to and from work/school, as well as pleasure use of your vehicle.
In some cases, a vehicle used for business purposes could still be covered under personal auto. Some carriers allow the vehicle to be designated as “business use”. This, mainly, allow non-commercial vehicles to be used for traveling and driving to appointments.
Different insurance carriers’ criteria for “business use” can vary.
Type and Weight of the Vehicle
There are some vehicles that, due to their size and weight, will need a commercial auto policy in order to be insured. For example, a dump truck cannot be insured on a personal auto policy.
The damage these types of vehicles can cause is much greater than personal vehicles. Insurance companies counteract this by providing higher liability coverage limits for commercial policies.
In order to get a better idea about your specific situation, please contact your agent with any questions.
If you are unsure whether you need a commercial auto policy, or if your personal auto policy will cover you in a certain situation, your CRG agent can give you more information and ensure you are properly covered.
If you know of someone who could benefit from the services of a CRG agent, forward this to them!