You’ve been using your own vehicle for business purposes for months now and the thought finally occurs to you: “Do I need commercial auto insurance to cover my vehicle while I’m working?” You just might. Let’s walk through some questions and answers to figure out if your vehicle is covered through your personal policy or if you need the protection a commercial auto policy offers.
How does commercial auto insurance differ from personal auto insurance?
Commercial auto insurance is for vehicles used specifically for business or work purposes (versus personal use). A commercial policy can offer greater coverage than a personal policy in terms of liability and physical damage. Since the damage can be significantly greater if you’re in an accident involving a large vehicle, equipment, and work activities, you need more extensive coverage.
A commercial policy will typically offer the following types of coverage:
- Liability (bodily injury and property damage)
- Other Than Collision (physical damage)
- Medical payments
- Uninsured motorist (underinsured motorist sometimes included as well)
- Hired auto
- Non-owned auto
- Rental reimbursement with loss of use
How do I know if I need commercial auto insurance?
What exactly qualifies as a business or work purpose? Vehicles like semi-trucks, dump trucks, tow trucks, food trucks, service utility vehicles, work vans, and company cars more obviously fall into the “commercial vehicle” category. But what about the car you drive to and from work meetings every day or the pickup truck you use to haul company equipment? What if you’re self-employed? These situations can be more difficult to clearly categorize.
To figure out if you could benefit from (or if you’re required to carry) commercial coverage for the vehicle you use for work, ask yourself the following questions. Also take a look at this helpful personal vs. commercial auto insurance chart for several common scenarios.
What type of vehicle do you drive?
If you have a large vehicle—that weighs 10,000 pounds or more—or a vehicle with a load capacity of more than 2,000 pounds, you will need a commercial policy, regardless of what you use it for. If your vehicle has equipment used for business purposes installed on it, such as a toolbox, ladder rack, or hydraulic lift, you will probably need commercial insurance
A common coverage gap we see is a large truck being rented for moving. While this is personal use, the truck exceeds the 10,000-pound weight requirement. This will likely create an exclusion on your personal auto policy.
Who owns the vehicle you drive?
Whose name is on the title of the vehicle? This is whom insurance carriers consider to be the owner and, therefore, they have insurable interest of the vehicle. If the business you work for owns or leases a vehicle to you, it will require commercial coverage. If you own your own business as a sole proprietor, you may need both personal and commercial insurance, depending on what all you use your vehicle for (see below).
What is your vehicle used for?
Your daily commute to and from work is covered in your personal auto policy. If you also use your vehicle to haul goods and equipment or to transport other people regularly, however, you might also need commercial insurance.
Here are some common scenarios that could require you to have commercial coverage:
- Your employees operate the vehicle regularly
- You lease or rent the vehicle to others
- You drive employees or clients around regularly
- The work you do requires higher liability limits
- Your vehicle tows a trailer used for business
- You transport tools, goods, or equipment
- Your vehicle is driven to perform a service for which you are paid
- You transport goods in your vehicle for a fee
If you drive for Uber, Lyft, or another rideshare company, you probably won’t be required to carry commercial insurance; however, your personal policy may not offer enough coverage for both you and your customers. So what can you do? Start by asking your insurer if they offer rideshare insurance as an option to add to your personal policy; this type of insurance can be less pricey than commercial insurance and will protect you if you get into an accident on the job.
How costly is commercial auto insurance?
Commercial auto insurance may be more expensive than personal auto insurance since its coverage limits are more extensive. However, how much your insurance costs will depend on several different factors. The more your vehicle costs and the heavier it is, the more your insurance will cost. How you use your vehicle, how much coverage you need, who will be using the vehicle regularly, and your driving record can also impact your rates.
Is commercial auto insurance tax deductible?
Yes, in most cases, you can deduct commercial auto insurance as a regular business expense. However, to find out how to use the deduction best, consult with your CPA or tax professional. Keep track of your commercial vehicle-related costs throughout the year, so you can quickly prove you used your vehicle for business purposes when it comes time to file your taxes.
If you still don’t know for sure if you need commercial auto insurance for your vehicle, we’d be happy to help! Give us a call or message us online, and we’ll be in touch as soon as possible. We offer commercial and personal auto insurance from various carriers for businesses and individuals in and around the Midwest region.
Request a quote, and we’ll put together some customized coverage options to fit your needs.