Published in July 28, 2021

What is commercial car insurance?

What is commercial car insurance?
Home > Insurance > What is commercial car insurance?

Commercial car insurance is a type of insurance that’s designed to protect cars used for business against accidents, liability and third-party damage.

Commercial car insurance generally covers the same components as a standard car insurance policy. It’s vital for a business to have insurance, especially when there’s a vehicle registered under the business name.

Other users of commercial car insurance are truck drivers, food trucks and even dump trucks. They are all vehicles used for business, hence why they all need insurance. If you’re using your personal vehicle for business purposes, you should consider a commercial insurance policy, as you will not be covered by a standard policy.

Many components from a standard policy are also offered from commercial car insurance policies. They cover your vehicle in the event of an accident, theft, weather events or liability. This also includes reimbursement for medical and legal fees.

Driving yourself to and from work isn’t covered under commercial car insurance but instead your personal vehicle policy. This is because commercial car policies only cover you if the trip is purely for business purposes, such as driving clients to showings or driving trucks filled with tools.

Ride-share Drivers

If you’re a ride-share driver, you will not need a commercial car policy, as you’d only need to add ride-share coverage added to your personal policy.

Similar to regular insurance policies, commercial car policies contain coverage components such as:
Liability coverage: This covers you if an injury is caused by you or your employee to another party while driving the covered vehicle. Additionally, property damage liability is covered if the damage is caused to another party’s property while using a covered vehicle.
Medical payment coverage / personal injury coverage: This covers medical expenses for the driver and passenger of the covered vehicle, regardless of who’s at fault.
Collision coverage: Pays for damage to your vehicles from theft, vandalism, extreme weather, falling object, or other non-crash incidents.
Uninsured/under-insured motorist coverage: Pays for damage caused by an uninsured or under-insured driver.

Commercial policies also offer a number of types of specialised coverage that personal policies do not. These include:
Trailer interchange coverage: Covers trailers your vehicles use that are owned by other companies
Rental reimbursement with downtime: Covers your costs to rent a temporary replacement if your vehicle needs repairs
Hired vehicle coverage: Covers you when you rent cars or vans for employees or clients
Non-owned vehicle coverage: Covers you when your employees use their own cars to conduct business for you

What’s the difference between commercial and standard car insurance?

The main difference between regular car insurance and commercial car insurance is that a regular policy covers you and your vehicle when you’re driving it for everyday use, while commercial car insurance covers you when you’re using a vehicle for business purposes.

If you’re self-employed and got in an accident whilst working, your regular car insurance won’t cover any related claims. That’s because the vehicle was used for business purposes. Therefore, for those reasons, you will need to purchase commercial car insurance as it’s a separate product and not a policy you could add to your existing account.

Though commercial car insurance policies offer similar coverage components as regular car insurance policies, there are other coverage benefits that you’ll also receive:
– Policies have higher liability coverage limits
– Tax-deductible (personal insurance may be partially tax-deductible only if you use your car for business)
– Can cover either named employees or can offer blanket coverage for all employees
– Commercial auto insurance includes extra coverage that personal insurance does not, including equipment coverage.

Who needs commercial auto insurance?

If you just use your personal vehicle to drive to and from work, you don’t need a commercial car policy, you’re covered by your standard policy. But if you use your vehicle for work, your personal auto policy won’t cover you, and you’ll need commercial auto insurance.

Here are some major factors to consider, to determine whether you should purchase separate commercial car insurance:
Ownership of the vehicle: You must have a commercial car policy if a vehicle is owned by your company; Otherwise vehicles owned by self-employed individuals might also need a separate policy.
Use of the vehicle: If you’re driving your vehicle for business purposes, you might consider purchasing a commercial car policy in addition to your existing car insurance. Commuting to and from work isn’t covered by commercial car insurance; However, if your vehicle is used to transport people or goods for work, then you will certainly need additional commercial car insurance.
Make and model of the vehicle: Some vehicles must be insured by commercial car insurance regardless of use and ownership. Additionally, any work-related adjustments, like a ladder rack or toolbox, require commercial policies.

Do ride-share drivers need commercial auto insurance?

Ride-share drivers are not required to have commercial auto insurance, here’s why:
Ride-share companies like Uber, Didi and Ola require their drivers to have their own personal insurance. That provides some additional insurance when drivers are working.

Due to a coverage gap between personal car policies and the coverage from ride-share companies, many ride-share drivers also choose something called ride-share insurance.

To understand the coverage gap, ride-share driving consists of three different periods:
One is when you have the app haven’t picked a customer.
Two is when you’re en route to pick up a customer.
Three is when the customer is in your car.

Ride-share companies generally cover you during period two and three of a drive; However period one may be a coverage gap.

And even though you have a personal auto policy, your insurer considers you working during period one and could deny your claim if you have an accident while the app is on. That’s why many Uber drivers opt to purchase additional insurance to make up for the coverage gap.

Ride-share insurance is available either additional coverage on top of your personal policy or as an additional policy alongside your personal policy. If you drive for a rideshare app and want additional ride-share coverage, contact your provider to learn more about it.

How much does commercial car insurance cost on average?

Commercial car insurance tends to be more expensive than standard insurance. That’s due to higher liability coverage and the option to extend coverage to employees and multiple vehicles.

Similar to standard car insurance, your commercial premium will also depend on several factors. Your premium depends on factors such as location, driving records and types of cars insured.

You may be able to get discounts with purchasing commercial car coverage. That includes discounts for insuring multiple vehicles under the same policy or if your business has been running for longer than a certain number of years.

Plan a thorough budget with Moneysmart to understand your spending habits and how much you can afford for your monthly payments.

Where can you purchase commercial car insurance?

Most insurance companies that sell personal auto insurance policies also sell commercial auto insurance policies. The best place to begin is with your current insurer to determine whether they can give you commercial coverage.

While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

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