What is commercial auto insurance?

It’s not just for truck drivers.

Logan Sachon

Logan Sachon

Published June 8, 2018

Semi-truck drivers have commercial auto insurance; so do food trucks and dump trucks. These are all obviously commercial vehicles, and they need commercial auto insurance. But if you use your personal car for work, you may also need a commercial insurance policy, because your personal auto insurance doesn’t cover your vehicle when you’re using it for business. Do you need commercial auto insurance?

Read on to find out:

What is commercial auto insurance?

Commercial auto insurance is car insurance for vehicles that are used for work (this is in contrast to standard or personal auto insurance, which is car insurance for vehicles that are used in your personal life).

Like personal auto insurance, commercial auto insurance is made up of several types of insurance coverage, including:

  • Liability coverage: Bodily injury liability (BIL) for when you or one of your employees cause bodily injury to another party while using one of your covered vehicles, and property damage liability (PDL) for when you or one of your employees cause property damage to another party while using one of your covered vehicles. (These types of coverages are combined into a “combined single limit” in commercial policies, while in personal policies they are often separated out.)

  • Medical payment coverage / personal injury coverage: Pays medical expenses for the driver and passengers of your vehicles if they’re in an accident, regardless of fault.

  • Collision coverage: Pays for damage to your vehicles from accidents, regardless of fault.

  • Comprehensive coverage: Pays for damage to your vehicles from theft, vandalism, weather, or other non-crash incidents.

  • Uninsured/underinsured motorist coverage: Pays for damage caused by an uninsured or underinsured driver.

Commercial policies also offer a number of types of specialized 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

How does commercial auto insurance differ from personal auto insurance?

The main difference between personal auto insurance and commercial auto insurance is that personal auto insurance is for when you’re using a car in your personal life, and commercial auto insurance is for when you’re using your car in your work life.

But the differences don’t stop there. Though commercial auto insurance offer many of the same kinds of coverage as personal auto insurance policies, it differs from personal auto insurance in several important ways:

  • Commercial auto policies have higher liability limits than personal policies

  • Commercial auto insurance is tax-deductible (personal insurance can be partially tax deductible if you use your car for business)

  • Commercial policies can cover either named employees or can offer blanket coverage for all employees

  • Commercial auto insurance includes extra coverage that personal auto insurance does not, including equipment coverage, like for trailers or forklifts

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Who needs commercial auto insurance?

Deciding whether you need to purchase a commercial auto insurance policy involves considering three major factors:

1. Ownership of the vehicle All vehicles owned by a company need commercial auto policies; but some vehicles owned by individuals also need commercial auto policies, based on use or model (see below).

2. Use of the vehicle If you own your vehicle and use it for work, you may need a commercial auto policy in addition to your personal auto policy so that you and your car are covered when you’re using it for work. Commuting to and from work is covered under personal use, but if you also use your car to transport people, goods, or equipment for work, then you need an additional commercial policy.

3. Make and model of the vehicle Some vehicles must be insured by commercial auto policies regardless of use or ownership. If your vehicle has a gross weight of 10,000 pounds or more or has a load capacity over 2,000 pounds, then you need a commercial policy; standard auto policies won’t cut it. Additionally, any work-related modifications (like a ladder rack) require commercial policies.

Do Uber drivers need commercial auto insurance?

Rideshare drivers are not required to have commercial auto insurance. (There is one exception to this: in New York City, rideshare drivers are required to have commercial auto insurance.)

Here’s why: Rideshare companies like Uber, Lyft, and Juno require their drivers to have their own personal insurance and provide some additional insurance when drivers on the clock.

But because of a coverage gap between personal policies and the coverage offered by the rideshare companies, many rideshare drivers also opt for something called rideshare insurance.

To understand the coverage gap, know that rideshare driving consists of three distinct periods:

• Period one is when you have the app on but haven’t matched with a customer. • Period two is when you’ve matched with a customer and are en route to pick them up. • Period three is when the customer is in your car.

The coverage provided by Uber and other rideshare companies is more robust during period two and period three than it is in period one — but your personal insurance considers you working during period one and could deny your claims. So many drivers opt to purchase additional insurance to make up for the coverage gap.

Rideshare insurance is available either as a rider on top of a personal policy or as a replacement to a personal policy, and can cost between $6 and $10 per month.

Do on-demand delivery drivers need commercial auto insurance?

When most people think of the gig economy, they think of ridesharing, but there’s another kind of gig that may require use of your wheels: on-demand delivery. From Postmates to Caviar to Amazon Flex, if you’re using your car to deliver food or goods, you may need coverage beyond what your personal policy has.

If you get in an accident while doing on-demand delivery, your personal insurance company will likely deny your claim. And while the delivery companies often provide supplemental liability insurance to their drivers when they are on active deliveries (that is, after they have picked up the food/packages and are headed to drop off), they don’t cover you during that “first period,” when you have the app on and are en route to pick up.

There aren’t explicit “on-demand delivery” insurance policies (yet), but some rideshare policies may work. Talk to your insurance company about your options to fill that coverage gap. And if you want to be fully covered, get a commercial policy.

Where can you buy commercial auto insurance?

Most insurance companies that sell personal auto insurance policies, like Allstate, Geico, Progressive, and AAA, also sell commercial auto insurance policies. The first place to start is with your current car insurance provider to discuss whether they can give you commercial coverage.

If you need a new provider, our list of the best car insurance companies is a great place to start.

How much does commercial insurance cost?

You can expect to pay between $1,000 to $2,000 per year ($80 to $160 per month) for a commercial auto insurance policy. Compare that to the average cost of a personal car insurance policy — just $866 a year, or $72 a month.

Rates depend on your location, the driving records of the drivers on your policy, and the type of vehicles you are insuring. For example, large cargo vehicles can cost much more to insure than small passenger vehicles.

Many insurance companies offer discounts if you insure multiple vehicles under the same policy.

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Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.