Even though personal auto and commercial auto policies are a packaged product and contain many of the same coverages, there are distinct differences that are very important. Most every contractor will use a pickup truck or van for work that is insured on their personal auto policy. Doing so puts the vehicle owner at risk for several reasons:
- Personal insurance policies exclude coverage when the vehicle is being used for business. If the insured is driving a van for work purposes and is involved in an at-fault accident, according to this exclusion in the policy, the company can elect not to pay the claim. Why aren’t most drivers aware of this? They never read the terms of the policy and typically forget warnings from an agent the minute they leave the office or hang up the phone.
- Typically, the personal auto liability limit is $300,000 or $500,000. This is an insufficient limit when using a vehicle for business purposes.
- Although the personal auto policy will never provide protection for tools or equipment, this coverage can easily be endorsed onto the commercial auto policy by using an inland marine rider. Having your tools and equipment stolen from your vehicle while parked at the job site can easily put a major dent in your company’s resources.
The differences between personal auto insurance and commercial insurance are there because the risk is different from individuals, families and businesses.
Liability Limits
A commercial auto policy contains much higher liability limits that are necessary because of the higher asset value of a company versus a household. Where a personal auto policy’s highest limit is $250,000, the commercial auto policy offers limits as high as $4 million dollars and can be extended even higher by using a commercial umbrella policy.
Types of Vehicles
The personal auto policy insures only personal passenger vehicles with a limit of about 10,000 pounds, whereas the commercial policy will insure any type of vehicle from passenger autos to super heavy dump trucks and tractor-trailers. Many commercial policies will also insure mobile equipment used in heavy construction projects. Whether your contracting business uses pickup trucks, vans, or heavy-duty box trucks, you will be able to keep all your vehicles and equipment under one commercial policy.
Number of Vehicles
Most personal auto policies limit the number of insured vehicles to four passenger vehicles, although an individual or family can have multiple policies if needed. The commercial policy does not limit the number of vehicles to be insured or the number of drivers on the policy. This makes keeping all vehicles and equipment under one policy much easier to deal with.
Additional Equipment
Only on a commercial auto policy will you be able to add coverage for additional equipment such as specialty trailer hitches, lift gates, high-reach buckets, and specialty toolboxes. This type of equipment is easily damaged in an accident so why take the chance with a personal auto policy that will offer no coverage at all.
Fairbanks Insurance Brokers is a leading source for contractor’s insurance services.
Here is What We Recommend:
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursem*nt for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.
Get A Quote
For more information and a free commercial insurance quote, contact an insuranceprofessional at Fairbanks Insurance Brokers at(949) 595-0284.
FAQs
For a very serious accident or one with a number of injured people, your personal auto policy may not be enough to cover the damages. In that event, the injured parties would likely sue to collect damages from your business.
What is the difference between personal and business car insurance? ›
Commercial auto insurance typically provides for higher policy limits than personal auto. The point here is to safeguard your business assets from lawsuits and other liabilities.
What is the definition of business use on a personal auto policy? ›
It's a fact that most personal auto policies do not provide coverage for business-related accidents and incidents. So, if something goes awry while you or an employee is driving for business-related reasons, you'll have to pay out-of-pocket for any legal, repair, and car rental costs.
Are employees driving their own vehicles a business risk? ›
Many a time, employers aren't even aware of employees using their own vehicles for business. However, when an employee uses his own vehicle for business purposes, it puts the company in a disadvantaged position since the company is at risk of non-owned auto liability.
What makes you high risk for auto insurance? ›
Typically, insurance carriers view drivers as high risk if they've been convicted of DUIs, accumulated many points on their driver's licenses or been involved in several car accidents. A driver may also be considered high risk if they have poor credit or have made multiple insurance claims in the last three years.
What's the difference between commercial and personal insurance? ›
A personal insurance policy typically provides coverage for homes and their contents, whereas a commercial insurance policy is designed to safeguard the structures and assets associated with a business, such as an office, warehouse, or other commercial property.
What is the difference between personal and professional liability insurance? ›
Personal liability insurance covers damages or injuries to others on your personal property. Professional liability insurance covers you if claims are filed against you for professional negligence, errors, omissions, or other issues that can arise if you provide professional services for a living.
Is your personal auto policy endorsed to allow for business use? ›
Simply put, a personal auto policy is not designed to cover the employee using their personal auto for business purposes. For this exposure to be covered under the employee's personal auto policy, the employee typically would need to add an endorsem*nt that covers the use of a personal vehicle for business purposes.
What is excluded in a personal auto policy? ›
Injury to an employee: If you have an employee who is injured while working, losses should be covered under worker's compensation and not your personal auto insurance policy. Vehicle being used as a residence: An insurance company can deny coverage on a claim relating to any vehicle being used as a residence.
What is the business use of vehicle insurance? ›
Your personal auto insurance policy covers you while driving to and from work, but not while making deliveries, picking up supplies, and other work-specific uses. A business auto policy would cover you and your personal vehicle in case you're at fault for an accident during a work-related errand.
Yes. However, using a car for business and personal reasons may reduce your overall tax deductions. For example, you won't be able to deduct any mileage acquired through personal use of the vehicle. So, you'll need to keep track of business mileage vs.
What is the risk of using a personal vehicle for work? ›
Vicarious liability means you could be held liable for unlawful actions taken by someone else. For instance, if one of your employees acts negligently and gets in a car accident while using their car for work purposes, you could be held responsible for the damages.
Is a company car taxable to the employee? ›
Under IRS general rules, all use of a company car is considered personal use unless the employee documents the business use of the car. Personal use of a company vehicle generally results in taxable wages for the employee.
Who do auto insurance companies see as the highest risk? ›
High-Risk Auto Insurance: Overview
- Younger and new drivers.
- Drivers with a conviction for driving under the influence (DUI)
- Drivers with speeding tickets or other moving violations.
- Drivers with multiple at-fault accidents.
- Drivers with a reckless-driving conviction.
- Drivers with lapses in insurance coverage.
6 insurance industry risk factors
- Compliance changes. Regulatory dynamics in the insurance sector are never static. ...
- Cybersecurity threats. ...
- Technology changes. ...
- Climate change & other environmental factors. ...
- Talent shortage. ...
- Financial risks.
That's because life insurers take on a financial risk by covering you. The higher the chance of an insurer having to pay out your policy, the more you'll pay — or the harder it will be to get coverage. If you fall into one of these five groups, you may be deemed a high risk to insure.
Is it better to finance a car through business or personal? ›
When you buy a car under an LLC, you could end up paying more money in the long run. For example, interest rates for business-related loans tend to be higher than personal loans. In addition, commercial auto insurance is often more expensive because they cover more for damages than individual plans.
Is business car insurance tax deductible? ›
Generally, you need to use your vehicle for business-related reasons (other than as an employee) to deduct part of your car insurance premiums as a business expense. Self-employed individuals who use their car for business purposes frequently deduct their car insurance premiums.
What is the difference between personal and business mileage? ›
One way of understanding business miles vs commuting miles is that while travel between workplaces is business mileage, everyday travel to a regular workplace from the employee's home is a commute, and thus generally not deductible.
What is the difference between business and professional insurance? ›
General liability covers physical risks, such as bodily injuries and property damage. Professional liability insurance covers more abstract risks, such as errors and omissions in the services your business provides.
