Do You Need a Car Insurance Policy for Business Use?

If you use a vehicle for business purposes, it's essential to have commercial car insurance. Personal car insurance won't cover accidents that occur during business use. Commercial car insurance provides coverage for liability and repair costs for your vehicle and others involved in accidents.

Commercial auto insurance offers broader coverage for different vehicles, higher liability limits and additional protection. With more comprehensive coverage than personal auto insurance, it ensures better protection for your business.

Business vehicle insurance covers vehicles used for business purposes, like company cars, commercial trucks, vans, and food trucks. Others call it commercial auto insurance or business auto insurance.

As a business owner, you need insurance similar to personal vehicles.

Your Business Owners Policy (BOP) won't cover vehicles, so you'll need a separate policy. Remember that personal car insurance won't pay for an accident that occurs while driving for work.

Business vehicle insurance covers a wide variety of vehicles used for business purposes, including:

• Cars
• Trucks
• Tow trucks
• Vans
• Trailers
• Buses
• Motorcycles
• For-hire livery
• Delivery vehicles
• Service vehicles
• Food trucks
• Construction vehicles
• Farm vehicles

We recommend consulting your insurer to confirm the coverage available for your business vehicle.

If you have a personal auto insurance policy, you are the owner of the policy. But in a commercial auto insurance policy, the business owner or an authorized representative is the policyholder. Commercial auto insurance generally has higher policy limits, higher coverages and covers a broader range of vehicles. Where collision and comprehensive coverage are optional add-ons for personal auto insurance, commercial auto insurance policies often include them.

Commercial auto insurance covers vastly more than personal auto insurance. A policy typically comes with liability insurance, collision insurance, comprehensive insurance, medical payments coverage and uninsured/underinsured motorist coverage.

Car insurance for business use typically includes the following coverages:

Specific coverages may vary based on the insurance company and your business type. Read your policy carefully or inquire with an agent to understand what's covered.

Combined Single Limit (CSL) insurance is a type of commercial auto insurance that covers bodily injury and property damage claims with a single limit of liability.

Most commercial auto insurance policies have split limits, which means there are separate limits for bodily injury per person, bodily injury per accident and property damage. A CSL can give you peace of mind. You can rest assured that your policy will cover you regardless of whether an accident involves more than two people or damage to one or more vehicles. However, more comprehensive coverage comes with higher premiums.

Generally, you can expect to get more than you pay for if you choose a policy with exhaustive coverage. The types of business owners that will primarily benefit from a CSL insurance policy are those with:

• Businesses that operate large trucks and buses that pose a more significant threat and stand to cause more damage on the road
• Companies that operate in high-risk areas with a high risk of accidents
• Businesses with a high net worth that need to protect high-value assets

Weigh the pros and cons before choosing to get a CSL. If you’re unsure whether or not it’s right for you, you should talk to an insurance agent for more personalized advice.

Depending on the nature of your business, you can opt for optional coverages, also called endorsements, to improve your protection.

Endorsements to consider include the following:

Most businesses should have at least $500,000 in liability coverage per vehicle. This limit should protect you if you injure someone or damage their property in an accident involving your business vehicle.

You might want to consider coverages like collision, comprehensive and uninsured/underinsured motorist coverage. Collision covers your vehicle's damage in an accident, regardless of fault. Comprehensive handles theft or non-collision events like fire, flood, or hail. Uninsured/underinsured motorist coverage takes care of your medical bills and property damage if you're in an accident caused by a driver without enough insurance.

When getting business vehicle insurance, the amount you need depends on factors like the number and value of your work vehicles and the nature of your work.

Some insurance providers offer more specific types of commercial auto insurance, like truck, trailer and even livery insurance. These policies come with vehicle-specific coverages and options that could better suit your line of work.

The cost of business vehicle insurance varies significantly depending on multiple factors. One of the primary determinants is the insurer itself, as different insurance companies have different underwriting criteria, discounts and pricing structures. Other factors influencing costs include:

• The type of business you own: Businesses with accident-prone vehicles like delivery trucks may have higher rates than those with less accident-prone vehicles like passenger cars.
• Your employee’s driving record: A clean driving record typically results in lower rates, while a poor driving record may lead to higher rates.
• The number of vehicles you have: Insuring more vehicles may lead to more expensive rates than businesses with fewer vehicles.
• The age and type of vehicles: Older or more expensive-to-repair vehicles generally have pricier rates compared to newer or less costly-to-repair vehicles.
• The amount of coverage you choose: Opting for higher liability limits can result in higher rates than businesses choosing lower limits.

Commercial auto insurance typically has higher policy limits, resulting in higher premiums than personal car insurance. However, it provides better financial protection for you and your business. It acts as a safety net, preventing financial ruin from accidents, and also protects your business from lawsuits.

In all states except New Hampshire and Virginia, business vehicle insurance is mandatory. These two states do not require business owners to have liability insurance for their company-owned vehicles, but they are still responsible for any damages caused by an accident.

A commercial auto insurance policy can also help financially protect you regardless of the size of your business. It might be a good idea to get insurance if:

• You use a vehicle to transport goods, deliver products or provide services
• You have employees who drive the company car for work
• You have a fleet
• You offer a ride-sharing service
• You drive a heavy-duty trailer or truck with a high payload capacity
• You transport hazardous materials
• You require higher policy limits

If you're an independent contractor with no plans to hire more employees operating a business vehicle smaller than a large SUV, you can likely rely on your personal car insurance.

However, consider the nature of your business and the risks that come with it. Six-wheeler trucks are likely to cause more damage than a passenger car. Getting car insurance for business use is especially wise if you transport hazardous materials or spend long hours on the road.

Typically, you can't have personal insurance for a company car. Personal auto insurance usually doesn't cover vehicles used for business because insurers view businesses as higher-risk drivers. These drivers are more likely to have accidents and may carry valuable cargo.

Only hired or non-owned auto insurance will cover cars that are used for work but are not owned by the business.

Assess your business's needs and the risks related to your vehicles. Consider factors like the type of vehicles, their usage and the potential risks they’re likely to encounter on the road.

2. Check Liability Limits

Check if the insurance policy's liability limits are enough to protect your business in case of an accident. Businesses with higher risks may need higher liability limits.

3. Review Your Deductibles

Look at the deductibles in the insurance policy. A higher deductible may mean lower premiums, but ensure it's a manageable amount for your business if you need to make a claim.

4. Check for Additional Coverages

Consider any additional coverage options that may be relevant to your business, such as roadside assistance, rental reimbursement or coverage for special equipment.

5. Consider Your Employees’ Driving Records

Similar to personal auto insurance, a bad driving record can drive up premiums. Consider your employees’ driving records when deciding who gets to drive the company car.

6. Read the Exclusions Carefully

Read the policy exclusions carefully to know what's not covered. Make sure the policy fits your business needs, and if it doesn't, consider adding optional coverages or finding a different provider.

7. Shop Around

Get quotes from several insurance companies to compare coverage and prices. This practice will help you find the right and affordable policy for your business. If you're unsure about your business insurance needs, consult with an agent or broker specialized in commercial auto insurance. They can guide you and find the best coverage for your specific needs.