When do I need business car insurance?

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Things to Remember...

  • Personal auto insurance is designed to protect vehicle owners who are driving their personal vehicles
  • While a traditional auto policy will provide protection if you’re commuting to and from work, there are exclusions written into the policy that all policyholders should be aware of
  • If your vehicle is used solely for business, you’ll have a need for a special commercial auto insurance policy
  • In addition to business use, there are exclusions written into policies for drivers who’re involved in delivery or in the transport of people for a fee
  • If your vehicle is registered to or owned by your business, it’s important that you carry business auto insurance
  • It’s important that you review the auto insurance requirements and the exclusions so that you can avoid having a loss where your claim is denied

Personal car insurance isn’t the type of financial product that’s designed to cover business vehicles. Unfortunately, the definition that you use to define the business use and the definition that the insurance company uses can be dramatically different.

This is why it’s important that you take out time to learn what is and what’s not covered under the standard auto insurance.

Read on and find out if your freelancing job or that side job that you took delivering food has changed your needs for auto insurance.

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What is business and commute usage under a personal auto insurance?


One of the things that make it difficult to understand what personal car insurance covers and what it doesn’t is the usage classification.

There’s a long list of risk determinants that insurance companies use to calculate premiums and vehicle usage is one of these.

It’s believed that how a vehicle is used can have an effect on how likely a household is to have a loss.

What can be confusing is that there are three different types of usage classes that can be used on a policy and each has a different bearing on rates.

Here’s a breakdown of what each use means:

  • Pleasure Usage – Class used to rate vehicles that are driven strictly for recreational reasons or to run errands around town. This is the least expensive class and is for vehicles that are solely used for personal reasons.
  • Commute – Commute class is assigned to vehicles that are regularly driven to and from work or school. In order for a driver to qualify for a commuter classification, they must go to one work site and not to several sites throughout the day.
  • Business  A Business class on a personal auto policy can be a bit confusing. Rather than driving to and from a single work site, a business user might drive to several job sites in their personal vehicle to visit their clients or to different offices.

While some types of business use are permitted in private passenger vehicles, there are very specific exclusions that make it so that not all business use is permitted.

What if my vehicle is owned by my business?

One of the biggest requirements is that you must be the registered owner and the title holder of a vehicle to insure the car under your name.

If the car is either owned or registered to a business entity, you’ll automatically need business auto insurance on the vehicle.

This is because of the way that insurable interest works.

Since the car is registered to the business, it’s the business that is obligated to buy coverage and the business that is at risk of being sued for a loss.

It’s also the business that would be at a financial loss if something were to happen to the car. Combine all of this information together, and you can see why any vehicle registered to a business entity will need to buy commercial insurance.

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What types of vehicles are excluded from a personal auto policy?

You must be covering a private passenger vehicle for your personal auto insurance to provide coverage. This means that compacts, coupes, sedans, wagons, and minivans that are used for appropriate types of business can be covered under a personal policy.

Some policy forms, however, won’t extend business use coverage to a pickup truck or a van that’s used for any type of professional purposes.

Other types of vehicles that must be covered under a business insurance policy include:

  • Vehicles equipped with special equipment
  • Vehicles with altered suspension lifts or racing equipment
  • Vehicles with permanent toolboxes or ladder racks used for business
  • Utility vehicles, trucks or vans that exceed a Gross Vehicle Weight of 10,000 pounds
  • Vehicles with a rated load capacity of 2000 pounds or more

What types of business use are specifically excluded from my insurance?


Now that you know what types of cars are excluded, it’s time to learn what types of business uses are excluded under the policy.

Here are some of the usage types that would automatically make you ineligible for personal insurance even if you drive your car for both business and pleasure:

  • The vehicle is used for the delivery of goods and supplies
  • The vehicle is used to transport people as a taxi service
  • The vehicle is used in public livery or conveyance
  • The vehicle is driven by employees on an occasional basis
  • The vehicle is rented or leased to others

How does commercial auto insurance differ from personal auto insurance?

You might wonder what the difference is between commercial and personal insurance and the answer is in what types of coverage is offered.

You’ll get commercial liability coverage, protection while your vehicle is driven by employees, and the option to buy a combined single limit policy which can provide you with millions of dollars in protection.

There’s a major difference between liabilities and risk, so you may think you need a business auto policy, but assuming you don’t need one can lead to serious consequences.

Ask your agent if you’re covered to drive your vehicle for business in your situation. If you’re not, start using a rating comparison tool online and you can easily see how much commercial insurance will run you. Once you compare the instant quotes, make a selection and bind coverage.

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