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Driving for a business can mean a lot of things: maybe you are a professional driver, your job entails occasionally using a company vehicle or you deliver products as a side hustle. But did you know that driving for profit might mean you need a commercial auto insurance policy? Insurance for personal vehicles isn’t quite the same as insurance for business vehicles. Bankrate breaks down what commercial car insurance is, who needs it, where to buy it and how much you can expect to pay.
What is commercial auto insurance?
Commercial auto insurance is a type of insurance policy that covers vehicles used for business purposes. Any car that is used for business-related purposes should be covered by commercial insurance, whether it’s a van, pickup truck, box truck, utility truck, food truck or a regular car. Employees who use their personal vehicle for business trips or services may also need a commercial car insurance policy.
In terms of protection, commercial auto insurance is similar to personal car insurance. Commercial insurance can include coverage for bodily injury liability, property damage liability, medical payments or personal injury protection (PIP) coverage, vehicle damage and accidents with uninsured or underinsured drivers. There may also be endorsements available to help you customize your policy.
Commercial vs personal insurance
There are a few differences between what commercial auto insurance is and what personal car insurance covers. For one, commercial car insurance can only be used for business vehicles. Usually, this means vehicles that are owned by businesses, but it could mean a vehicle that you own personally and use for business purposes. Standard car insurance covers vehicles for personal use — commuting, running errands, carpooling, etc.
Another difference is that commercial auto insurance may have higher coverage limits than a personal policy. Cars that are used for business purposes generally face more risk and therefore need more coverage. Because of that, commercial car insurance is often more expensive than personal insurance.
If you own a business that uses commercial vehicles, you might be able to claim a tax deduction on your commercial car insurance. This won’t apply if you are listed as a driver on your employer’s commercial auto policy. Personal car insurance is rarely tax deductible.
Who needs commercial auto insurance?
Any business that owns and uses vehicles as part of their business function — whether it’s one car or an entire fleet — needs to have commercial car insurance. Some examples of businesses that need commercial auto insurance include:
- Electricians and HVAC professionals that visit people’s homes
- Food delivery drivers and catering companies
- Contractors that haul materials and heavy equipment to job sites
- Landscapers and plow trucks
Employees who frequently use their personal vehicle for business purposes might also want to consider buying commercial car insurance. Some examples include:
- Realtors who drive to property listings
- Salespeople who travel to various locations
- People who drive for a ridesharing or delivery service
Because these types of employees might use their personal vehicles, they might be able to maintain personal auto insurance or use rideshare insurance as an alternative. Some personal auto policies allow drivers to stipulate if a car is used for business purposes, although those purposes are much more limited than commercial car insurance.
Using your vehicle to travel to and from an office on a regular daily commute is not considered a business use and doesn’t mean you’ll need commercial insurance. For vehicles used for commutes, there is usually a “commute” classification on personal auto insurance policies. You typically only need to consider commercial insurance if you are using your vehicle as part of a profit-making venture.
Commercial car insurance and the gig economy
The gig economy has changed how many people earn a living. Companies like Uber, Lyft, DoorDash and Instacart have exploded in popularity. But do drivers for these companies need commercial auto insurance?
It depends. Many personal car insurance providers offer endorsements for these types of drivers, but they might not apply in all situations. For example, most personal auto insurance endorsements for ridesharing drivers, like drivers for Uber and Lyft, only provide coverage while the app is turned on and searching for a ride, but stop the coverage once a driver has accepted a passenger. At that point, coverage should be provided by the ridesharing company, but the coverage limits provided might not be very high.
If you drive for any kind of ridesharing or delivery company, talk to your insurance agent. Depending on how often you are driving — part-time or full-time — you might need a commercial insurance policy to properly cover yourself any time you’re on the clock and behind the wheel.
How to get commercial insurance
Applying for commercial car insurance is a bit different than getting personal car insurance. If you’re looking to buy commercial insurance for the first time, here are some steps to follow:
- Find a few providers: Shop around and find a few insurance providers that offer commercial auto insurance in your area. You could evaluate these companies based on customer reviews, financial strength ratings and the types of coverage offered. You can even call up an agent to get a better sense of the customer service.
- Provide information about your business: Some companies have online quote tools, and others require you to call an agent. In either case, you will need to provide information about your business, including what the business does, how long it’s been around and what your company cars are used for.
- Provide information about the company cars: Next, you’ll be asked to list the type(s) of vehicle your business owns. In addition to the make, model and year, you might also need to disclose information like the vehicle’s original cost, the weight and size, how far employees typically drive and who the main driver of the vehicle is. This information plays a large role in how much commercial auto insurance is and what you can expect it to cost.
- Provide information about the drivers: Next, be prepared to give some information about the people who drive the vehicles. You will probably need to provide the drivers’ license numbers of your employees so the insurance company can validate them as legal drivers and check their driving records.
- Get a quote: Once you’ve submitted the required information, you’ll be given a commercial car insurance quote based on your responses. It can be a good idea to get quotes from several different insurance companies to see which one can best meet your needs.
- Sign a policy: After choosing an insurance company and customizing your coverage with an agent, you can sign the policy and begin your coverage. Be sure to ask for multiple copies of your proof of commercial car insurance documentation and leave one in all of the insured company cars.
How much does commercial insurance cost?
Commercial car insurance is generally more expensive than personal car insurance because the coverage limits tend to be higher. However, there are a number of factors used to determine the cost of your policy. Some of those factors include:
- The type of vehicle and the original cost
- The driving records of the employees who use the car
- The nature of the vehicle’s use
- How far the vehicle is driven
- The number of cars being insured
- The policy’s coverage limit
- The deductibles
- The business owner’s claims history
Like personal car insurance, your business might qualify for certain discounts that help lower your premium. You can often get discounts for paying your premium in full, remaining claims-free, having continuous insurance coverage and bundling your commercial auto policy with other business insurance policies.
What does commercial auto insurance not cover?
Commercial auto insurance may cover your personal vehicle, but only if you are using it for business-related purposes. While a morning commute may seem like it falls under this umbrella, it generally does not. If you are commuting to the office in your personal vehicle, you would be covered by your personal car insurance policy. However, if you are using your personal vehicle to drive a client to a work function, that is when a commercial auto insurance policy would kick in. Commercial car insurance does not usually extend to rental vehicles used for work, either.
Tools and equipment can also be a gray area. Work-related equipment that is attached to a commercial vehicle is usually covered by a commercial auto insurance policy. In order for non-attached equipment to be insured, it must be scheduled on a business equipment policy.
Frequently asked questions
The best car insurance company is different for everyone. Many car insurance companies offer commercial insurance, so you can look at our review of the best car insurance companies as a starting point. Some major providers that sell commercial insurance are Allstate, Geico, State Farm and USAA.
Yes, any business owner who uses a vehicle for work purposes probably needs a commercial auto insurance policy. Typically, the fewer drivers you have to insure, the cheaper your policy will be.
You might be able to save money on your commercial auto insurance in a few ways. First, make sure to shop around and get quotes from multiple providers before you buy a policy. Comparison shopping is often one of the best ways to know if you’re getting the best coverage and price for your needs.
You might also qualify for discounts through your insurance company for paying your annual premium in full, having a good driving record or having continuous insurance. Increasing your deductibles is another way to lower your premium, but make sure you can afford to pay the deductibles if you need to file a claim.
Commercial auto insurance can cover a variety of business vehicles such as tow trucks, food trucks, commercial vans and trucks, company-owned cars, straight trucks and hireable liveries like taxis and limousines. Commercial auto insurance may also cover personal vehicles that are used for business purposes, with some exceptions.