Commercial Auto Insurance vs. Personal Auto Insurance

While most people are familiar with personal auto insurance policies, commercial auto insurance is a little more complicated. To break this down let’s discuss these policies individually, compare commercial and personal auto insurance, and figure out what coverages you need. 

What Is Commercial Auto Insurance?

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Commercial auto insurance is simply an insurance policy that provides coverage for any cars, trucks, or vans that are used for the operation of a business. You may hear this type of policy referred to as commercial vehicle insurance, business insurance, or business auto insurance, but they all fall under this category of commercial auto insurance.

Commercial auto insurance is intended for businesses. It is a type of policy that helps protect the company, rather than one individual, from physical damages and liability claims for usage that isn’t covered by a standard personal auto insurance policy.  

You can insure many different types of vehicles under a commercial auto insurance policy. Food trucks, service utility trucks, and work vans are some examples of larger commercial vehicles that will require commercial auto insurance. You can add additional coverages for employees operating the vehicle or protection for the equipment inside. Other vehicles such as a company issued cars, may require commercial auto insurance if they are used for business purposes. 

Commercial auto insurance typically provides broader coverage than personal auto insurance. This is because, as a business, you may be carrying expensive tools or equipment in your vehicle, have multiple people driving your vehicle at any given time, and drive longer distances in shorter periods of time than you would with your personal car.

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What is Personal Auto Insurance?

Personal auto insurance is the type of car insurance that most people are familiar with. If you own a car, you are required to have insurance for your vehicle. Basically, a personal auto insurance policy is insurance for your personal vehicle. This policy may include coverage for things like liability claims, medical payments, or collision protection. It all depends on the policy you choose. 

A personal auto insurance policy only covers personal vehicles like sedans, pickup trucks, or vans that that can carry an excess of no more than 6,000 pounds. So, those big semi-trucks and other heavy-duty vehicles you see on the highways require commercial auto insurance and will not be approved for a personal policy. 

Personal auto insurance policies can include liability coverage as it is required by most states in the U.S. Liability coverage helps provide protection to other drivers if you cause bodily injuries or property damages. Up to a specified limit, personal auto insurance may also help to cover the cost of medical bills and lost wages if you are injured. 

Liability coverage protects the insured driver, and family members of the insured driver who are on the policy, and any drivers the policyholder has permitted to drive their vehicle. However, what and who is covered under your personal auto insurance will vary depending on the details outlined in your policy. 

Your personal auto insurance policy might include some additional coverage depending on the policy you choose. This could include protection from uninsured drivers or additional coverage for medical payments or physical damage.  

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What’s The Difference Between Commercial Auto Insurance and Personal Auto Insurance?  

So, now that we have a good idea about what these two policies are separately, it’s time to compare commercial auto insurance vs personal auto insurance.  

The main difference between personal auto insurance and commercial auto insurance lies in who owns the vehicle. Generally, if a business owns the vehicle, it must be covered by commercial auto insurance. However, if you own the vehicle, you’ll need personal auto insurance. 

This line can become blurry for small businesses. Small business owners and employees might use their personal vehicles for business purposes occasionally. For instance, they might use their own car to transport business equipment or to deliver goods to customers. 

In this situation it’s important to know that personal auto insurance policies, most of the time, do not provide coverage for any accidents or damages that occur while operating a vehicle for business purposes. That means if you get into an accident while providing a delivery service you will not be covered by a personal auto insurance policy. So, when deciding whether you’ll need a commercial auto insurance policy, it’s important to consider how often you use your vehicle for business purposes.  

Another difference between personal auto insurance and commercial auto insurance is the cost. Commercial auto insurance typically costs more than personal auto insurance because commercial policies usually have higher limits than personal policies. Higher limits mean more coverage in the case of an accident. More coverage is helpful when you’re seeking insurance for an entire business rather than just one person. 

However, commercial auto insurance doesn’t have to break the bank. There are many factors that influence the cost of commercial auto insurance including: 

  • If you are working in an industry that is considered high-risk 
  • What type(s) of vehicle(s) your business owns 
  • The number of vehicles that your business owns 
  • How often the vehicle is used for business purposes 
  • The driving record(s) of you and your employee(s) 
  • The type(s) of coverage(s) you choose 
  • The policy limits that you choose 
  • Finally, your auto insurance claims history 

To sum it all up, the two major differences between personal auto insurance vs commercial auto insurance are the type of uses it covers and the cost of the policy.

Do I Need Both Commercial and Personal Auto Insurance?

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So far, we’ve learned that you need commercial auto insurance if you drive your vehicle for business purposes. On the contrary, you’ll need personal auto insurance if you drive your car for personal uses. But what if you use your vehicle for both personal and business purposes? Do you need to have both personal and commercial vehicle insurance? 

The simple answer is no! You do not need to have both commercial and personal auto insurance for the same vehicle. If you regularly use one car for both business and personal use, a commercial vehicle insurance policy may be enough to cover you. 

Most personal auto insurance policies won’t provide coverage that is needed when operating a vehicle for business purposes. So, you’ll want to consider how often you use your vehicle for work related activities when deciding if you should insure your multi-use car under a commercial or personal policy. For example, if you use your car for personal use, but drive it to a client’s location to do business on occasion, a personal auto insurance policy might be right for you. 

Most of the time, if you are involved in an accident in a company vehicle while on personal business, a commercial auto insurance policy may cover you. In this scenario, if your vehicle is mostly used for business purposes, but you occasionally use it to pick up lunch on your break, a commercial auto insurance policy would make the most sense. 

All in all, you do not need both commercial auto insurance and personal auto insurance for the same vehicle. Contact your agent to review your situation to get the best advice about which kind of policy will meet your needs.  

See! Commercial and personal auto insurance doesn’t have to be complicated! A good rule of thumb when deciding between the two is to ask yourself, who owns the vehicle? If you own it, go with a personal auto insurance policy unless you are a small business owner that uses the vehicle for business purposes. If the vehicle is owned by a company however, commercial auto insurance is probably the way to go.  

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