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What Are the Differences Between Commercial and Regular Auto Insurance?

Anybody who owns and operates a vehicle needs some level of auto insurance, both to stay within state law (unless you live in the apparent chaos of New Hampshire or Virginia) and to maintain a degree of financial safety while on the road. For most of us, a personal policy is the way to go, but there are exceptions to this. Namely, drivers who use their vehicles for work purposes may need to enroll in a commercial insurance policy instead. But how do you know if you need it, and how does it differ from personal coverage? That’s what we’re here to cover today, so let’s break those questions down separately:

When do I need commercial auto insurance?

In the most general sense, a commercial policy is required for drivers who use a vehicle as part of their daily work. However, anyone who merely has to commute to and from the office every day doesn’t need a commercial policy; that’s just the transportation inherent to the job. If however, you (or someone under you) must drive while on the clock as part of your day-to-day duties, chances are you’ll need the insurance.

Generally, this boils down to four factors:

Who owns and drives the vehicle?

If your car is owned, leased, registered, or titled to a business, partnership, or corporation, you’ll probably need a commercial policy. If you’re a sole proprietor, this might not be the case, but the other factors outlined below may change that.

How is the vehicle used?

How you use your vehicle is the big one. If you use your car for more than just commuting to and from one or two job sites, personal coverage probably isn’t enough. Regularly doing any of the below will likely require you to go commercial:

  • Picking up or delivering goods (including food, supplies, materials, or messages)
  • Shuttling paying customers between locales
  • Leasing or renting one or more vehicles
  • Regularly loaning one or more vehicles to employees or non-listed drivers

What is the type and weight of the vehicle?

If you’re driving something heavier than a standard-sized pickup or SUV (a dump truck, tow truck, or semi truck, for instance), you’ll probably need commercial insurance, since heavier vehicles can cause more damage if they’re involved in an accident. That includes any vehicle that exceeds 10,000 pounds in total weight or has a load capacity that’s over 2,000 pounds.

What liability limits are required?

This last one is very general: your employer and your insurance agent may require higher liability limits on your vehicle — limits that a personal policy can’t go up to. In that case, commercial auto insurance may be necessary to reach those numbers.

How does commercial insurance differ?

So how does this type of coverage differ from a personal policy?

In the most general sense, businesses have to deal with more financial concerns that individual drivers don’t have to worry about, so they have to cover more in their policies. It typically boils down to higher limits and a plethora of add-ons for additional types of coverage that go beyond the usual ones (like PIP and uninsured motorist). These can include:

  • Non-owned vehicle coverage: covers employees while driving vehicles not owned by the company
  • Single-deductible coverage: covers trailers and other equipment that you haul, and allows you to pay your deductible only once for both the vehicle and its load
  • Rental reimbursement with downtime: covers costs that incur when you have to temporarily replace an inoperable commercial vehicle
  • Any auto liability: extends liability coverage on existing vehicles to new, hired, and non-owned vehicles

The bottom line is this: commercial insurance is necessary for anyone who’s driving as part of a larger entity that extends beyond their needs as an individual. If you and/or your vehicle is tied to any company, personal coverage is probably not going to cover it.

Getting the proper coverage

Still, the line between personal and commercial policies can be a blurry one. Any combination of unique factors can determine who needs what kind of insurance, such as being self-employed, using your vehicle for personal as well as business purposes, or having an unusual vehicle. The best way to figure out what will be appropriate for you is to speak with your insurance company, as your agent will be able to determine what you will and will not need. It can get tricky, but it’s better to take the time to figure it all out before you find yourself on the end of a rejected claim!

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