Some small business owners and self-employed individuals report that they are confused whether to choose a commercial or personal policy when insuring their vehicles. Experts say car owners should choose the right auto insurance in order to avoid paying unnecessarily and to avoid having problems when filing for a claim. Being a business owner does not necessarily mean that a person has to purchase commercial auto insurance, since the type of policy to apply for depends on several factors.
According to industry specialists, needing a commercial policy depends on how a vehicle is used and what company it is insured with. Car insurance companies have different guidelines regarding their policies and some may surcharge premium rates for vehicles insured for business use. To avoid confusion, experts advise consumers to know how “commercial use” is defined by car insurers.
Experts say that a vehicle is used commercially if it is used to transport goods for compensation or fee. This includes delivering pizzas or newspaper, door-to-door consulting services, catering, landscaping or snow plowing services, daycare or church van services, delivery of goods from farm to market, or providing food service to any event.
As explained by specialists, business owners who use their vehicles commercially need more liability coverage than what a personal auto insurance policy affords them. They add that most states require commercial vehicles to carry higher liability limits. They also note some cases where clients require businesses to carry higher liabilities before transacting with them.
Insurance providers do not accept claims made by car owners if they insured their commercial vehicle under a personal policy. This is because commercial auto insurance provides specialized coverage that is not available through personal policies. Among them is Non-Owned Auto coverage, which covers the vehicle of employees used in transacting or completing company business.
Non-owned coverage is paid for by business owners for automobiles personally owned by their employees. Another specialized coverage is Hired Auto coverage, which a company purchases to cover any vehicle that it hires. But experts warn business owners that it does not cover employees driving rented vehicles.
Specialists advise merchants to provide additional coverage to employees who regularly drive their vehicles. Those employees can be covered under the commercial vehicle coverage but cannot be included in a business owner’s personal policy unless they live with him.
As a general rule, policy holders need commercial auto coverage if the vehicle used is owned by a corporation or partnership. Vehicles driven by employees, used to haul equipments or tools exceeding 500 pounds, or deliver goods also require a commercial policy. Experts say that some heavy vehicles automatically require federal or state filings.
