Even though personal auto and commercial auto policies are a packaged product and contain many of the same coverages, there are distinct differences that are very important. Most every contractor will use a pickup truck or van for work that is insured on their personal auto policy. Doing so puts the vehicle owner at risk for several reasons:
- Personal insurance policies exclude coverage when the vehicle is being used for business. If the insured is driving a van for work purposes and is involved in an at-fault accident, according to this exclusion in the policy, the company can elect not to pay the claim. Why aren’t most drivers aware of this? They never read the terms of the policy and typically forget warnings from an agent the minute they leave the office or hang up the phone.
- Typically, the personal auto liability limit is $300,000 or $500,000. This is an insufficient limit when using a vehicle for business purposes.
- Although the personal auto policy will never provide protection for tools or equipment, this coverage can easily be endorsed onto the commercial auto policy by using an inland marine rider. Having your tools and equipment stolen from your vehicle while parked at the job site can easily put a major dent in your company’s resources.
The differences between personal auto insurance and commercial insurance are there because the risk is different from individuals, families and businesses.
Liability Limits
A commercial auto policy contains much higher liability limits that are necessary because of the higher asset value of a company versus a household. Where a personal auto policy’s highest limit is $250,000, the commercial auto policy offers limits as high as $4 million dollars and can be extended even higher by using a commercial umbrella policy.
Types of Vehicles
The personal auto policy insures only personal passenger vehicles with a limit of about 10,000 pounds, whereas the commercial policy will insure any type of vehicle from passenger autos to super heavy dump trucks and tractor-trailers. Many commercial policies will also insure mobile equipment used in heavy construction projects. Whether your contracting business uses pickup trucks, vans, or heavy-duty box trucks, you will be able to keep all your vehicles and equipment under one commercial policy.
Number of Vehicles
Most personal auto policies limit the number of insured vehicles to four passenger vehicles, although an individual or family can have multiple policies if needed. The commercial policy does not limit the number of vehicles to be insured or the number of drivers on the policy. This makes keeping all vehicles and equipment under one policy much easier to deal with.
Additional Equipment
Only on a commercial auto policy will you be able to add coverage for additional equipment such as specialty trailer hitches, lift gates, high-reach buckets, and specialty toolboxes. This type of equipment is easily damaged in an accident so why take the chance with a personal auto policy that will offer no coverage at all.
Fairbanks Insurance Brokers is a leading source for contractor’s insurance services.
Here is What We Recommend:
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursem*nt for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.
Get A Quote
For more information and a free commercial insurance quote, contact an insuranceprofessional at Fairbanks Insurance Brokers at(949) 595-0284.
FAQs
For a very serious accident or one with a number of injured people, your personal auto policy may not be enough to cover the damages. In that event, the injured parties would likely sue to collect damages from your business.
Is your personal auto policy endorsed to allow for business use? ›
So if you are still wondering: does my personal auto insurance cover business use? The answer is: no. Essentially, if you are driving for commercial purposes and only have personal car insurance, you are driving as if you are uninsured altogether.
What is the difference between personal and business auto insurance? ›
A personal auto policy provides coverage to protect you, your personal assets and prevent you and your family from experiencing financial hardship. Commercial auto insurance provides coverage to protect you and businesses from auto-related lawsuits and settlements. Another key factor is vehicle ownership.
What is the definition of business use on a personal auto policy? ›
For example, they might use their own car to travel to job sites, transport equipment, or deliver goods. Personal auto insurance policies almost always exclude business use. That means you're not covered if you get into an accident while driving for work (with the exception of your commute).
What is the difference between a commercial vehicle and a personal vehicle? ›
Commercial vehicles are vehicles used for business purposes, such as transportation of goods or passengers. They differ from personal vehicles, which are used for personal purposes, such as commuting or leisure activities. Commercial vehicles come in various shapes and sizes, from semi-trucks to vans and buses.
Can I use my personal vehicle for my business? ›
What kind of business driving can you do with your personal vehicle? The general rule of thumb is pretty straightforward: you can use your vehicle to get yourself to and from work or a meeting, but you can't use your vehicle to do your work unless you have the right insurance coverage.
Is using a personal vehicle for work a risk? ›
Vicarious liability means you could be held liable for unlawful actions taken by someone else. For instance, if one of your employees acts negligently and gets in a car accident while using their car for work purposes, you could be held responsible for the damages.
What is the difference between personal and business liability? ›
Personal liability insurance covers injury or damage compensation claims made against you by a third party. Public liability insurance is the commercial version of this insurance - it covers compensation costs if someone makes a claim against your business for injury or damage.
What is the difference between personal and professional liability insurance? ›
Personal liability insurance covers damages or injuries to others on your personal property. Professional liability insurance covers you if claims are filed against you for professional negligence, errors, omissions, or other issues that can arise if you provide professional services for a living.
Is business insurance the same as individual insurance? ›
Small business plans have much larger doctor and hospital networks, and provide access to many more specialist and top hospital systems. Individual plans, especially those on the Covered California exchange, are much more restrictive and limited in the doctor network.
Personal use of a company car (PUCC) is when an employee uses a company vehicle for personal reasons. Driving a company vehicle for personal use is a taxable noncash fringe benefit (aka benefit you provide in addition to wages).
Who is covered under a personal auto policy? ›
Under liability coverage, the following people are protected: The named insured or family member (child, spouse). Anyone who is allowed to drive the insured's covered vehicle. Anyone driving for an organization to which the insured lends their covered vehicle (the organization is also protected).
Do you allow the business use exclusion to be on the employees' personal auto policy? ›
However, the employee's policy would most likely deny coverage of physical damage and bodily injury claims due to policy exclusions such as business use of a personal auto. Simply put, a personal auto policy is not designed to cover the employee using their personal auto for business purposes.
What is the difference between personal and business car insurance? ›
Commercial and personal policies both protect against lawsuits, bodily injury, property damage, and other issues. That said, commercial auto insurance typically has higher limits and covers more complex claims.
What is the difference between a commercial vehicle and a regular vehicle? ›
General Definition
At its most basic, a vehicle is designated “commercial” when a business registers the vehicle as such and uses it for business purposes.
What does it mean to use a vehicle for commercial use? ›
A “commercial vehicle” is a vehicle which is used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property (for example, trucks and pickups).
Can personal car insurance be a business expense? ›
Generally, you need to use your vehicle for business-related reasons (other than as an employee) to deduct part of your car insurance premiums as a business expense. Self-employed individuals who use their car for business purposes frequently deduct their car insurance premiums.
What is a business use endorsem*nt? ›
Your personal car insurance can cover some business uses like errands and travel with the right endorsem*nt. Such coverage usually requires a business use endorsem*nt on your personal auto insurance policy. Business auto insurance may be required if your work use involves towing, transporting or deliveries.
