If a vehicle is designed, manufactured, and primarily used for commercial purposes, it typically must be covered by a commercial auto policy. These policies often have higher liability limits than personal auto insurance.
Employees driving a car on business might be exposed to a significant lawsuit without a commercial auto policy.
Coverage for Passengers
A personal policy will not provide any protections for passengers in the event of an accident. A commercial policy is necessary if you transport people as part of your job. This is the only way to protect you if an accident occurs while on the clock. A personal insurance policy is likely enough if you commute to work or run errands on your lunch break. However, if you drive to multiple business locations daily or transport equipment or people for your business, you’ll need a commercial policy. Keeping a driving log can help determine whether a commercial or personal policy is appropriate for your situation. Your insurance agent can explain what’s covered and help you make an informed decision. Hired and non-owned liability coverage may also be an option to consider. This will protect you if your employees drive personal cars for work-related reasons, and it covers the cost of any damages to their car or property.
Coverage for Equipment
If your vehicle is outfitted with permanent work equipment (like toolboxes or ladders) or carries expensive tools and equipment, it must be covered by a commercial policy. The vehicle’s weight is also a consideration: more extensive and heavier vehicles may cause more damage in an accident and need special insurance to help pay for the repair bill. Commercial policies also typically offer broader coverages like rental reimbursement with downtime and auto leasing/loan coverage. Most companies with a fleet of cars, trucks, or vans invest in commercial auto insurance. However, many instances exist when employees use their vehicles for business purposes and need protection. A commercial policy can be amended to include “any auto” or non-owned and hired auto coverage, which provides liability protection when an employee’s car is used on business. This type of coverage is typically called the Business Auto Coverage Form (BACF). Adding BACF often only adds a few thousand dollars to the cost of the policy.
The most significant difference between personal and commercial auto insurance is the scope of coverage. Personal auto policies may not cover your vehicle for business purposes, including travel between work sites and transporting equipment or goods. These activities require a business owner’s policy, including a specific commercial use definition. Suppose Jim, an independent tow truck operator, owns a flatbed truck he uses for personal and business purposes. He might occasionally drive the truck to the grocery store, but most of the time, he’s using it to tow disabled vehicles. Most personal auto policies won’t cover this truck because it has decals for his towing company, indicating its primary commercial purpose. Commercial auto policies offer higher limits and broader coverage than personal policies but are typically more expensive. Fortunately, you can save money on your premiums by bundling your personal and commercial auto policies together.
Coverage for Business Interruption
Business interruption insurance, or BLI, helps pay for lost income if your company is forced to shut down temporarily due to property damage. This coverage includes fixed expenses like rent, taxes, and employee wages. It also helps cover the cost of moving your operations to another location. This is standard coverage for large businesses and can be essential to your disaster recovery plan. The policy also covers additional expenses you incur during restoration, like advertising and promotional costs.
Additionally, it can help cover the cost of renting a new space to conduct your business if you have to move from your original location. Most small business owners purchase a business interruption policy in addition to commercial property/business property insurance. Contingent and extended business interruption policies are also available as riders to a general business property policy.