Commercial auto insurance: what is it and how much does it cost?
Fact-checked with HomeInsurance.com
If you drive your car for a business, such as delivering packages or passengers, then you’ll probably need commercial auto insurance. That’s because your personal auto insurance specifically excludes coverage for your car while you’re using it for work.
Sometimes it can be tricky to draw the line between what personal use of an auto is compared to business use, and the definitions provided by insurance companies aren’t always clear.
Here’s the main thing to keep in mind: if you use your vehicle at all for business purposes, the odds are you need commercial auto insurance.
What is commercial auto insurance?
Commercial auto insurance is a form of auto insurance that includes special coverages designed for commercial use.
While many of the coverages included in commercial auto insurance are similar to the coverages in a personal policy, the coverage limits are generally much higher to accommodate the higher legal risks often associated with private enterprise.
Financial and insurance expert Laura Adams says:
“If you’re a business owner and own or lease a vehicle in your business’s name, you should have commercial auto insurance to protect your company and any employees who drive for you.”
“Additionally, if you use a personal vehicle for business purposes, you probably need a commercial auto policy. The problem is that if you get into an accident while you’re conducting business, other than commuting to an office, your personal auto policy may not cover you.”
What’s the difference between commercial and personal auto insurance?
At first glance, personal and commercial auto policies look similar. Both include bodily injury and property damage liability, comprehensive and collision coverage, as well as various options like roadside assistance depending on the carrier.
However, the differences between personal and commercial auto insurance are important and could save you from paying thousands of dollars in damages due to inadequate or non-applicable auto insurance.
Personal auto insurance
Personal auto insurance only covers you when you’re driving the car for personal reasons. This insurance will cover you as you drive to and from work, as well as on your lunch break.
If you are driving while on the clock, your personal policy will not apply. So if you get in a wreck while driving at work, you won’t have any coverage unless you have commercial auto insurance.
Financial and insurance expert Laura Adams says:
“If you’re self-employed and unsure whether your work affects your auto insurance, be sure to speak with your insurer. It’s better to get the right coverage now than to have a claim denied later on when it’s too late.”
Commercial auto insurance
Commercial auto insurance covers you for any duration of time in which you’re driving for work purposes. These kinds of policies have a few important differences from personal auto insurance.
On commercial policies, liability limits are usually available at higher amounts. Personal auto policies generally max out at $500K while you can get up to $1 million in coverage on commercial policies. Even without commercial auto insurance, business owners should consider buying umbrella insurance, if they qualify, to protect personal assets if sued.
Another big difference is that commercial policies offer more coverage for supplies and equipment and also provide coverage for the delivery and/or transport of goods and/or people. This coverage comes in handy when you’re making deliveries for a business, and it’s not a coverage available with personal auto insurance.
Commercial auto insurance also provides non-owner vehicle coverage. This coverage is used when employees need to drive their own vehicle or a rented vehicle while at work. Because the employee is using a car that’s not owned by the business, they’ll need special coverage to drive it.
|Personal auto insurance||Commercial auto insurance|
|Needed for personal driving||Needed for work-related driving|
|Lower coverage limits||Higher coverage limits|
|Generally no coverage for equipment||Coverage for supplies and equipment |
|Coverage for other cars and drivers might be excluded||Includes limited coverage for non-owned vehicles and other drivers|
Who needs commercial auto insurance?
Anyone driving for business reasons needs commercial auto insurance. If you’re delivering anything or anyone, you absolutely need it. Personal auto insurance specifically excludes what’s called “livery” vehicles. Find any pizza delivery driver who’s been in a car accident, and they’ll likely tell you their personal auto insurance was no help.
Additionally, if the vehicle is titled in the name of a business, you have to have commercial insurance. The exception here is that if you’re a sole proprietor, you can still have personal auto insurance IF you’re not driving the vehicle for business use. If you ever have employees that drive a vehicle owned by your business or you, their personal auto insurance will NOT cover them—it must be insured by you. There are also differences in how many vehicles you can put on a personal policy versus a commercial policy.
What does commercial auto insurance cover?
Commercial auto insurance includes many of the same standard coverages as personal auto insurance. These coverages include liability coverage for bodily injury and property damage, collision coverage, comprehensive coverage, medical payments and coverage for uninsured/underinsured motorists.
Aside from these standard coverage, commercial auto insurance offers a few unique coverages that cannot usually be found in personal auto insurance. These unique coverages include:
- Non-owner coverage – Most commercial auto insurance policies provide this coverage. It covers employees driving cars that are rented or borrowed rather than owned by the company.
- Equipment & supplies – Some commercial auto insurance companies include protections from damage to equipment and supplies within a covered vehicle in some cases.
- Loading and unloading liability – Some commercial auto insurance companies include coverage for liability that occurs from loading and unloading a covered vehicle.
How much does commercial auto insurance cost?
The cost of insurance is highly individualized, so each policy will come with a different premium. But commercial auto insurance is generally more expensive than personal auto insurance.
The reason is commercial auto insurance comes with much higher coverage limits than what you would find in a personal policy. Coverage limits for commercial auto insurance are generally at least $500,000 and can be well over $1 million.
According to Nationwide, here are a few of the factors that affect the price of commercial auto insurance:
- Make, model and year
- Cost of the vehicle when brand-new
- Vehicle weight (for trucks)
- Driving histories for all potential drivers
- How the business will use the vehicle
- History of auto insurance claims
- Number of commercial vehicles that will be insured under the policy
Do Uber drivers need commercial auto insurance?
Every ride-share service has its own rules for how drivers are insured, but you usually don’t have to worry about commercial auto insurance if you’re working as a driver for a ride-share company.
Uber, for example, provides commercial auto insurance for their drivers. According to the company website:
“Uber maintains auto insurance designed for ridesharing on your behalf when you’re driving on our platform. When you’re not driving with Uber, you would look to your personal auto insurance. Many personal auto insurers offer rideshare insurance endorsements that include additional coverage for rideshare drivers, but this is not required for you to sign up to drive with Uber.”
When in doubt, be sure to check the company’s policies regarding insurance so you are certain what is covered and what you may need to obtain separately.
- Personal auto insurance won’t cover you if you’re driving for work purposes
- Commercial auto insurance is needed for commercial drivers
- Coverage limits in commercial policies are higher than in personal policies
- Commercial auto insurance also provides unique coverages for businesses
Don’t expect your personal policy to cover you if you need to drive for work. Before agreeing to a job that includes driving, check to see if you need commercial insurance first. The company may provide commercial insurance, but it’s never a given. If there’s any doubt, don’t hesitate to contact your auto insurer and see what they suggest.