Do I need a Personal or Commercial Auto Policy?

When do I need a commercial auto policy?

If your vehicle is registered as a commercial auto, if it has a commercial license plate, or if you use it for business purposes you need a commercial auto policy. Personal auto policies generally exclude coverage for “commercial-type vehicles”, vehicles furnished or available for regular business use, or vehicles that are the business (e.g. taxis, limos, etc.) Additionally, if you are a business owner and your employees use their personal vehicles during their employment (even if it is only to run small errands) it is important to add some form of “non-owned” auto coverage to your general liability or commercial auto policy.

Can I extend business coverage to my personal auto policy?

Depending on your policy, coverage may be extended from your personal auto policy for private passenger vehicles, pickups or vans. Of course, this coverage is only provided when you let your insurance company know that you are using the vehicle for company use. If your vehicle is a on a personal auto policy and your told your agent/company that you are only using the vehicle for local pleasure use, your claim might be denied when the claims adjuster finds out you were using it for business purposes. (Especially when they see your business lettering or decal on the side of your vehicle.)

Even if your personal auto carrier will extend coverage to your business vehicle, you should still consider getting a commercial auto policy. Personal auto limits are often offered with much lower limits than a commercial auto policy. Commercial auto policies can also extend coverage to your employees or to vehicles you rent for business purposes, personal auto policies will limit your coverage to the named insured which does not include your business.

If you formed an LLC or incorporated your business you should also consider why you formed that business entity in the first place. One of the big advantages to forming a separate business entity is to limit your personal liability (if someone were to sue your business you don’t want them to go after you house, your savings, etc.) If you hit someone with a personally insured vehicle being used for business purposes, you may have just inadvertently opened yourself up to some personal liability.

What about using business coverage for personal use?

Unless there is a specific exclusion for personal use, most commercial auto policies will cover named drivers when they use a company vehicle for non-business purposes. Named drivers are drivers that are specifically scheduled on the commercial auto policy, if an unnamed driver is operating the vehicle when an accident occurs (especially when the vehicle is not being used for business purposes) your business could possibly be without coverage.

If a commercial vehicle is the only vehicle you have in your household, there are also some special coverages you should be looking for. Commercial auto policies may be missing some important coverage that are typically provided by your personal auto policy. For instance, if you borrow a car that happens to be uninsured or under insured, your commercial policy will not provide excess coverage like a personal auto policy will. Special coverage provided by a Drive Other Car (DOC) endorsement is a must when a separate personal auto policy is not in place.

A named non-owner personal auto policy may be another option for you or your family members if the only vehicle owned is covered on a commercial auto policy. This coverage will ensure that your family is covered if you are using a vehicle for non-business use and ensures that your commercial auto rates are not increased for a non-business-related claim.

The bottom line

It is important to discuss all the possible uses of your commercial vehicle with your insurance agent. Auto insurance becomes very complicated when you start using your vehicles for business purposes. Don’t try to figure it out by yourself or expect someone to figure out your complete exposure in 15 minutes or less. Contact Shove Insurance today and we will find the right business auto policy for you.